What is now Wesfarmers Ltd (ASX: WES, OTC: WFAFF, ADR: WFAFY) began its existence as a tiny farmers’ cooperative in the West Australian wheat belt in 1914.

It’s now the eighth-largest publicly traded company Down Under, its AUD39.03 billion market capitalization as of Nov. 15, 2012, trailing only mining giants BHP Billiton Ltd (ASX: BHP, NYSE: BHP) and Rio Tinto Ltd (ASX: RIO, NYSE: RIO), Australia’s “Four Pillar” banks, including Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY) and dominant telecom Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY).

The largest private-sector employer in Australia with almost 200,000 employees across the country, Wesfarmers is a broadly diversified conglomerate with numerous and varied assets and interests, including food, liquor, office supplies, discount department stores, home improvement and hardware, hotels and leisure, natural resources, industrial products and insurance.

Its solid cash flow, strong balance sheet and record of dividend growth recommending it, Wesfarmers is a new member of the AE Portfolio Conservative Holdings.

Management reported that fiscal 2013 first-quarter sales at its Coles supermarkets rose 4.2 percent year over year to AUD8.44 billion.

Coles, the second-largest supermarket chain in Australia behind Woolworths Ltd (ASX: WOW, OTC: WOLWF, ADR: WOLWY), posted food and liquor sales growth of 4.9 percent to AUD6.59 billion for the 13 weeks to Sept. 23, beating its main rival’s Australian food and liquor sales growth of 4.6 percent for the 14 weeks to Sept. 30.

Wesfarmers Managing Director Richard Goyder noted “pleasing transaction and volume growth” during the period. Transaction and volume growth actually exceeded sales growth, as Coles continued its focus on improving product quality, service and value. Coles reported food and liquor price deflation of 3.2 percent during the quarter, as prices for fresh produce fell and it discounted its prices.

According to Coles CEO Ian McLeod, “Customers have rewarded our efforts to maintain lower prices with more than three million extra transactions every week compared to just four years ago.” Coles’ comparable food and liquor sales growth was 3.7 percent for the quarter, beating Woolworths’ food and liquor comparable store sales growth of 2.3 percent.

Wesfarmers’ Bunnings home improvement chain saw sales rise 4.7 percent in the first quarter to AUD1.81 billion, while discount department stores Target and Kmart saw sales rise 2.2 percent and 3.1 percent, respectively. Comparable store sales at Target were of 4.1 percent, dragging on earnings gains in food and liquor.

Following the company’s annual general meeting on Nov. 14 Mr. Goyder expressed optimism to The Australian that rising consumer confidence sparked by lower interest rates will produce a stronger Christmas trading period for Australia’s retailers.

Mr. Goyder said Wesfarmers’ retail division was seeing “green shoots” of improved consumer sentiment. Mr Goyder noted that the recovery was most visible in Wesfarmers’ discretionary retail businesses, including Target and Kmart.

However, Mr. Goyder warned that weak metallurgical- and thermal-coal prices, along with a strong Australian dollar, had brought about “the worst conditions we have seen in many years” for the industry. Deteriorating market conditions, together with higher royalty payments and the July 2012 introduction of a carbon tax in Australia will “significantly impact” Wesfarmers’ Resources division in fiscal 2013.

Wesfarmers operates the Curragh coal mine in Queensland and has a 40 percent interest in the Bengalla project in New South Wales. In October the company said the average price it would receive for steelmaking coal from Curragh would fall by about 26 percent quarter over quarter in the final three months of 2012. In fiscal 2012 Resources contributed 12 percent of Wesfarmers’ overall earnings before interest and tax (EBIT).

Mr. Goyder concluded his remarks to shareholders at the annual general meeting by noting that “all of our divisions with the exception of the Resources division are tracking well, and we are hopeful for a positive trading outcome in the retail businesses during the important Christmas period.”

Wesfarmers’ balance sheet remains in a healthy position, with key liquidity ratios further improved over fiscal 2012. Due to the cash generative nature of the conglomerate and a staggered debt maturity profile, Wesfarmers could comfortably repay any debt maturing in future years from cash flows.

Over the last four years Wesfarmers’ operating cash flows have funded significant replacement and net growth capital expenditure of approximately AUD1.7 billion per annum and also a dividend that’s grown from AUD1.10 per share for fiscal 2009 to AUD1.65 for fiscal 2012.

Wesfarmers cut its dividend from fiscal 2008 to fiscal 2009 as the Great Financial Crisis unfolded in to the Great Recession in all parts of the world except Australia.

That it was spared an official recession didn’t mean, however, that the economy Down Under didn’t suffer. But the company is back on the dividend growth track. The payout ratio for fiscal 2012 was 89.8 percent, manageable for a company that generates as much cash and has as little debt as Wesfarmers does.

Wesfarmers is Australia’s second-largest retailer. In 2007 it paid AUD22 billion to acquire Coles Group Ltd, which then trailed only Woolworths Ltd (ASX: WOW, OTC: WOLWF, ADR: WOLWY) in the retail space.

The Coles Division operates 2,231 food, liquor and convenience outlets through the majority of the former Coles Group brand assets. These include Coles, Pick ‘n Pay Hypermarkets and BI-LO Supermarkets, Liquorland, Liquorland Express, Vintage Cellars, Coles Express and 1st Choice Liquor Superstores.

Wesfarmers also operates Target, Kmart and other former Coles Group entities. It also owns Bunnings Warehouse, Australia’s largest hardware chain. Following their acquisition in the Coles transaction Officeworks, Officeworks BusinessDirect and Harris Technology were added to Wesfarmers’ existing Home Improvement Division.

Coles owns 94 hotels, 79 of which are in Queensland. Eighty-three have 2,800 poker machines.

Wesfarmers other interests include 50 percent of Gresham Partners, a corporate finance business focused on mergers and acquisitions, and 50 percent of Wespine Industries, a softwood sawmill operation at Dardanup, Western Australia.

Wesfarmers Energy owns the Curragh coal mine in Queensland and a minority interest in the Bengalla coal operation in New South Wales.

Gas and energy interests include Kleenheat Gas, Wesfarmers LPG, which owns and operates a liquefied petroleum gas extraction plant facility in Kwinana, Western Australia, Coregas and a minority interest in Air Liquide WA. The Wesfarmers LPG facility started full production in 2008 and has capacity of 500 terajoules per day of natural gas producing a capacity capability of 350,000 metric tons per annum of LPG.

Wesfarmers’ Industrial & Safety Division incorporates Blackwoods, Bullivants, Total Fasteners, Protector Alsafe, NZ Safety, Packaging House, Protector Alsafe NZ, and Blackwoods Paykels. The division comprises product categories including tools, hardware, safety, apparel, welding and abrasives, mechanical services, packaging and power transmission, safety, handling, lifting and rigging, material handling, lifting and rigging, fasteners, hoses and conveyors.

Most of these Australia- and New Zealand-based specialty businesses hold a leading market position in their respective category. The division operates from a network of 241 branches supported by large distribution centers, hundreds of external and internal sales resources as well as e-business, websites and telemarketing channels.

Wesfarmers Insurance incorporates WFI, Lumley Insurance Australia, Lumley Special Vehicles and Lumley New Zealand as well as three broking companies, OAMPS Insurance Brokers Ltd, OAMPS UK and Crombie Lockwood. It also operates two premium funding brands, Lumley Finance and Monument Premium Funding, and has majority ownership of insurance software developer, Koukia.

Management reported revenue of AUD58 billion for fiscal 2012, while net income was up 10 percent to AUD2.13 billion. Earnings before interest and tax (EBIT)–management’s measure of divisional performance–were AUD3.5 billion.

Earnings per share were up, and cash flows were very strong. Every one of Wesfarmers’ eight divisions recorded increased underlying earnings in fiscal 2012, a solid outcome in an economically challenging environment in Australia.

The board of directors declared and management announced a final dividend of AUD0.95 per share, taking the full-year dividend to AUD1.65, up from AUD1.50 per share in 2011.

Coles delivered operating revenue of AUD34.1 billion, which was up 6.4 percent over fiscal 2011, and posted earnings growth of 16.3 percent to AUD1.36 billion. Coles posted 21.2 percent earnings growth in fiscal 2011.

Savings generated through improved operating efficiencies supported continued price reinvestment during the year, driving growth in volumes and profitability. The continuation of the renewal refurbishment program and the improvement of the store network further benefited performance in the year.

Bunnings’ operating revenue increased by 5.6 percent to AUD7.2 billion, while earnings increased 4.9 percent to AUD841 million. Amid tighter market conditions the result was underpinned by solid transaction growth from a number of merchandise initiatives and investment in customer service and value. Earnings were further supported by cost management initiatives and the improvement of the store network.

Bunnings was recently voted Readers’ Digest’s “Most Trusted Australian Retail Brand” for the seventh consecutive year. Readers’ Digest also nominated Bunnings as Australia’s “Most Iconic Brand,” ousting Vegemite from the top spot.

Officeworks’ operating revenue for the year grew by 0.7 percent to AUD1.5 billion. Earnings increased 6.3 percent to AUD85 million. The number of total transactions continued to grow during the year, offsetting heavy deflation and generally challenging trading conditions, particularly in technology related areas.

Kmart achieved operating revenue for the year of AUD4.1 billion, up just 0.4 percent. But the business produced earnings growth of 32 percent to AUD268 million. Improvements in product range along with better sourcing and stock management continued to drive efficiencies and support reinvestment in lower prices that were positively received by customers.

Kmart has now achieved eleven consecutive quarters of growth in transactions and units sold.

Target’s operating revenue decreased by 1.2 percent to AUD3.7 billion, but earnings of AUD244 million were in line with the prior year after excluding a one-off AUD40 million provision for future supply chain restructuring. Excluding this provision, Target contributed earnings of AUD284 million, despite difficult trading conditions, particularly in consumer electronics.

Underlying earnings were maintained through a focus on the profitability of promotions and lower levels of clearance activity due to better inventory management.

The Insurance division’s operating revenue of AUD1.9 billion was 10.1 percent higher than the previous year, which was particularly challenging. For fiscal 2012 the division reported earnings of AUD5 million after increasing reserve estimates for the Feb. 22, 2011, Christchurch earthquake by AUD108 million. Excluding this event underlying earnings were significantly ahead of fiscal 2011.

Revenue from the Resources division was AUD2.1 billion, up 19.9 percent, while earnings increased 19 percent to AUD439 million. The major driver of the result was higher export coal prices in the first half and improved sales volumes in the second half, following the completion in the fourth quarter of expansion projects at the Curragh and Bengalla mines.

Higher revenue was partially offset by extra costs associated with flood recovery efforts, one-off mine expansion preparation costs and higher government royalties.

The Chemicals, Energy and Fertilisers division reported revenue of AUD1.8 billion, which was 8.8 percent higher than the previous year. Earnings were AUD258 million, representing growth of 7.1 percent after excluding AUD42 million of insurance proceeds in the prior year related to the 2009 Varanus Island gas outage.

Earnings were supported by higher prices in the chemicals business and increased fertilizer sales, which offset a lower contribution from Kleenheat Gas and the loss of earnings from the enGen business following its divestment in August 2011.

The Industrial and Safety division reported revenue growth of 8.5 percent to AUD1.7 billion, up and delivered earnings growth of 14.5 percent to AUD190 million. This growth was supported by strong demand from the resources and engineering construction sectors.

Wesfarmers, which currently yields 4.9 percent, is a buy for long-term growth and stable income up to USD36 using the symbol WES on the Australian Securities Exchange (ASX) or the symbol WFAFF on the US over-the-counter (OTC) market.

Wesfarmers also trades as an American Depositary Receipt (ADR) on the US OTC market under the symbol WFAFY. The ADR represents 0.5 shares of the ASX-listed stock. Owning the ADR conveys all the same benefits as owning the ASX- listed WES share or the US OTC-listed WFAFF share, including the effects of a rising Australian dollar. Wesfarmers’ US OTC-listed ADR is a buy under USD18.

Wesfarmers’ fiscal year runs from Jul. 1 to Jun. 30. The company reports full financial and operating results twice a year; it typically posts first-half results in mid-February, with full-year numbers out in mid-August. The company also provides quarterly sales and revenue reports in October, February, April and July and hosts conference calls to discuss results.

The company declared a final dividend of AUD0.95 per share in respect of fiscal 2012 final results on Aug. 16, 2012, when it reported those numbers. This final dividend was paid Sept. 28, 2012, to shareholders of record on Aug. 27. The shares traded ex-dividend on this declaration as of Aug. 21, 2012.

Based on past practice management will declare an interim dividend when it reports fiscal 2013 first-half results on or about Feb. 14, 2013. An interim dividend of AUD0.70 per share declared Feb. 16, 2012, was paid Mar. 30, 2012, to shareholders of record on Feb. 27, 2012. Shares traded ex-dividend on this declaration as of Feb. 21, 2012.

Dividends paid by Wesfarmers are “qualified” for US tax purposes. The Australian government withholds 15 percent, based on the US-Australia tax treaty on double taxation. The two countries have not taken the step of eliminating withholding from dividends paid in respect of shares held in a US IRA, as have the US and Canada.

Among the 15 analysts who cover the stock, seven rate it a “buy” according to Bloomberg’s standardization of brokerage house recommendation terminology. There are six “hold” and two “sell” ratings on the stock at present.