Wesfarmers reverses early gain after FY results

Wesfarmers (WES) has fallen despite delivering a capital return of 50 cents and remaining optimistic on the current year's outlook in the face of subdued economic activity and continuing challenges for its industrials division.

The diversified retail giant reversed its early 2.5% gain in morning trade, dropping into the red by -1.34% to $41.38 at 1430 AEST.

The company posted a 6% rise in net profit to $2.26 billion for the year to June in line with analyst estimates, from $2.12 billion in the prior year, on the back of strong earnings growth across its retail division, with the exception of its struggling Target chain (see Cliona O'Dowd's Collected Wisdom).

It came as revenue rose 3% to $59.83 billion.

The special dividend payment, which will total about $579 million, or 1.2% of the group's market capitalisation, is subject to a ruling from the tax office on tax treatment of the payment and shareholder approval at the group's annual general meeting in November.

Wesfarmers will also pay a fully-franked final dividend of $1.03, pushing the total dividend to $1.80, a 9.1% increase on the $1.65 paid last year. The final dividend is payable on September 27.

Finance director Terry Bowen said "continued strong cash flows and robust credit metrics" had allowed for the special dividend and it was not expected to affect the company’s credit ratings.

The dividend payment would be paired with a share consolidation that would see one fully paid ordinary Wesfarmers share converted into 0.9876 ordinary Wesfarmers shares, which would also apply to partially protected shares.