Wesfarmers Limited (ASX: WES), the parent company of Coles, plans to de-merge with its subsidiary (Coles) and allow Coles to trade on ASX as a separate public company. Further, WES announced an update on Coles demerger wherein Wesfarmers' shareholders will receive 1 Coles share for every Wesfarmers share held and it is expected to be completed by November 2018, subject to shareholder and other approvals. According to Wesfarmers, the demerger would review the entire portfolio of the parent company. However, Wesfarmers would be handling 15% stake so that there could be no problem in the strategic alignment between the parent and subsidiary. Moreover, the objective of the retention is to sustain growth path ahead in term of loyalty, digital, and data.
The decision of the demerger has been taken by considering the outlook for both the companies. According to the top management of Wesfarmers, the revamping of the entire portfolio would help in achieving robust growth for Coles and Wesfarmers. The management believes that after the spin-off, the parent company would be left with the cash generative business. In addition, Wesfarmers would also be able to generate strong returns on the capital and strong momentum could be witnessed in the markets wherein both the companies would be working.
In the coming weeks, the insights about the business model of Coles, its capital structure, CapEx, top management people would be out. As a result, in the second half of October 2018, the management of Coles would be pitching in front of the institutional shareholders. The funders have a general idea about Coles and what could be basic numbers after the listing. They are aware that the company would hit the market with the investment grade (IG) rating and with net debt of around $2 billion. Moreover, the fact that the company would shell out 90% of the NP (net profits) in the form of dividends is not hidden from the investors. From the shareholder point of view, the matter of concern is different as they are more inclined towards the outlook of the top line. In addition to this, the shareholders are working to understand how the new top management, and demerger with the Wesfarmers, would impact the top line of Coles.
The top management of Wesfarmers believes that after demerger, WES will have a cash generative portfolio with solid returns on capital and the allocation of the resources would be towards other businesses. They added that Coles is backed by the solid fundamentals and have reached a stage where the company can operate independently.
The Income available from dividends remains attractive for many investors.
We take a look at the best yields on the market and assess what they say about a company’s prospect.
One Thing is certain, though, Australia interest rates are still low, making income difficult to come by and keeping the focus for many investors on high yielding stocks. Kalkine’s team of analysts bought you handpicked report for “Top 25 Dividend Stocks For 2018.”
ASX-relevant Special Reports are published year-round to provide a detailed analysis into an investing opportunity or a potential risk to your portfolio.
Click here to get your free report.
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkinemedia.com and associated websites are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.
As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.