Shares in National Australia Bank Ltd (ASX: NAB) traded flat this afternoon after the group revealed a 3% slide in adjusted cash profit for the quarter ending June 30 2016 versus the quarterly average of the March 2016 half-year result.

Revenue was flat for the quarter with growth in lending offset by a lower net interest margin with the main drivers of the falling profit being a rise in bad debts and the commodity price slump. Expenses for the period were down 1%, while the chief executive blamed higher funding costs for the failure to pass on all of the most recent RBA interest rate cut to home loan borrowers.

Dividends

For the quarter cash earnings were $1.6 billion and the group maintained its most recent interim dividend at 99 cents per share, with analysts generally expecting the final November dividend to come in fractionally lower than 99 cents.

The decision to maintain May’s interim dividend actually resulted in the group’s capital adequacy ratio declining around 20 basis points over the quarter to 9.5% as at June 30 2016. Indeed, the bank would rather issue debt and equity to raise capital than cut a dividend that is a sacred cow to investors and management alike.

Outlook

The shares currently sell for $27.16 which would place the NAB on a bumper yield of 7.3% plus franking credits if able to maintain the final dividend at 99 cents per share. This suggests the market expects a dividend cut, capital raising, or further downtrends in quarterly earnings over the next 12 months or so. Any of these scenarios is likely to put downward pressure on the share price and income seekers ought to consider the potential for capital depreciation on an investment made today.

Bank investors chasing dividends would be better off looking at Macquarie Group Ltd (ASX: MQG) in my opinion. It trades on a fractionally higher multiple of forecast earnings with a 5.4% yield and I expect it could deliver some low-single digit earnings growth in FY17. Analysts also expect consistent dividend and earnings growth over the next two financial years and it offers exposure to the strength of overseas and US capital markets, rather than Australia’s inflated residential property market.

How 1 Man Made 100x His Money After 50

Few know, that as Warren Buffett blew out the candles on his 50th birthday cake, he had just 1% of his current fortune. Think about it: At an age when most give up hope, Buffett was just getting started on the remaining 99% of his fortune. Goes to show you that it's never too late for you to potentially get rich. Which is why we've gathered the strategies we learned from Buffett, distilled them down to 11 simple lessons, and put it in an exclusive report for you to claim. Just click here to learn more about this handy investing guide.

HOT OFF THE PRESSES: Motley Fool’s #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.

Motley Fool contributor Tom Richardson owns shares of Macquarie Group Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.