Metcash vs Wesfarmers: Which ASX Dividend Stock Offers More in FY27?

Metcash Limited and Wesfarmers represent two distinct approaches to ASX dividend investing. Both companies pay fully franked dividends, but their current yields and business profiles differ significantly. Wesfarmers has an annual fully franked dividend yield of 3.58%, while Metcash has a higher yield of 6.35%, making the comparison relevant for investors who value both reliability and earnings stability.

Wesfarmers: Lower Reliable Yield Supported by Broad Diversification

Wesfarmers entered FY27 after another year of solid underlying growth across its portfolio. Group revenue in FY26 rose 3.4% to $47.27 billion, while NPAT excluding significant items climbed 8.3% to $2.87 billion.

Free cash flow also surged 15.8% to $3.99 billion, while return on equity reached 35.5%. However, operating cash flow fell 6.5% to $4.27 billion because the Group deliberately raised inventory levels to improve product availability during supply-chain disruptions and geopolitical uncertainty.

The underlying earnings growth was supported across several major businesses rather than coming from one division alone.

Key Business Performance

• Bunnings earnings: Rose 5.0% to $2.46 billion

• Kmart earnings: Increased 6.0% to $1.11 billion

• WesCEF earnings: Grew 18.5% to $473 million

• Wesfarmers Health earnings: Rose 18.8% excluding PPA amortisation

For FY27, Wesfarmers has set a plan to spend net capital expenditure of $1.3 billion to $1.5 billion.

Metcash: Higher Yield With Exposure to Some Specific Challenges

Metcash offers a different proposition, with its current annual fully franked dividend yield of 6.35%, substantially above Wesfarmers' 3.58%.

The company reported group revenue of $19.6 billion in FY26, up 0.7%. EBITDA increased 1.9% to $761.7 million, while operating cash flow climbed 3.5% to $558 million.

However, reported EBIT fell 0.8% and reported PAT declined 1.5%, showing that the overall earnings picture was more vulnerable than that of Wesfarmers.

Despite this, Metcash still has several important growth drivers. Food EBIT increased 5.4%, while Foodservice & Convenience also recorded impressive growth.

The completed integration of Total Tools and Hardware Group has created a larger platform intended to return the division toward mid-cycle margins. Metcash is also expanding its digital capabilities through the Sorted B2B marketplace, which has reached $5.9 billion and accounts for around 30% of Metcash revenue.

Dividend and FY27 Outlook

The higher yield also comes with greater exposure to individual business challenges.

Metcash kept its total dividend unchanged at 18 cents per share in FY26, representing around 74% of underlying profit after tax.

FY27 trading has begun with group sales excluding tobacco up 2.8%, but management expects first-half earnings to face pressure from persistent cost inflation and the end of accelerated tobacco excise benefits.

Conclusion

The two stocks therefore cater to different income priorities. Investors who place greater importance on reliability and diversified earnings can gain stable passive income through Wesfarmers.

Investors who require a higher yield and can accept relatively more risk should benefit more from Metcash's 6.35% fully franked yield.

The choice between WES and MTS therefore depends on the main priority. One route offers a more diversified earnings base and dividend growth, while the other provides a higher current income stream with relatively higher operating uncertainty.

(Source: Company Announcements)