At today's share price of around $30.60, National Australia Bank Ltd. (ASX: NAB) trades on a dividend yield of 6.4% fully franked. That's over 9.1% grossed up for those tax-effective franking credits.
NAB's fully franked dividend yield
As can be seen in this chart, NAB's dividend yield is not only higher than that of Commonwealth Bank of Australia (ASX: CBA), it even surpasses Telstra Corporation Ltd's (ASX: TLS) and BHP BIlliton Limited's (ASX: BHP).
Is it sustainable?
The big questions on everyone's mind is whether NAB's dividend yield is sustainable and if it is, can it grow?
Lately, some analysts have grown concerned about the impact of regulation on the banks and how that may affect their ability to keep raising dividends.
According to Morningstar's analyst consensus, NAB is expected to cut its dividend twice before 2020!
However, even if it cuts the dividend — which is a big 'if' — the analysts forecast it will only fall to $1.91 per share from its current $1.98 per share. At today's prices, that's still a yield of 6.2% fully franked.
Buy, Hold or Sell
National Australia Bank's dividend yield — 6.4% or 6.2% — looks very tempting. Heck, even if the bank's share price falls a little it could break even and produce a tax effective income.
However, it is important not to fall for the easy tactic of focusing solely on the dividend. As a long-term investor, you should demand dividends and growth.