Wesfarmers Limited (ASX:WES) stock is about to trade ex-dividend in 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Wesfarmers' shares before the 5th of November to receive the dividend, which will be paid on the 4th of December.

The company's next dividend payment will be AU$1.50 per share, on the back of last year when the company paid a total of AU$2.06 to shareholders. Calculating the last year's worth of payments shows that Wesfarmers has a trailing yield of 2.5% on the current share price of AU$84.00. If you buy this business for its dividend, you should have an idea of whether Wesfarmers's dividend is reliable and sustainable. As a result, readers should always check whether Wesfarmers has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 80% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 67% of its free cash flow as dividends, within the usual range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for Wesfarmers

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.ASX:WES Historic Dividend November 1st 2025

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Wesfarmers's earnings per share have been growing at 12% a year for the past five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

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Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Wesfarmers has increased its dividend at approximately 0.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Wesfarmers is keeping back more of its profits to grow the business.

To Sum It Up

Has Wesfarmers got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Wesfarmers is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. In summary, it's hard to get excited about Wesfarmers from a dividend perspective.

While it's tempting to invest in Wesfarmers for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Wesfarmers you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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