In the year ahead, Commonwealth Bank of Australia (ASX: CBA) shares are forecast to pay a fully franked dividend of 4.92%. Grossed-up for those tax-effective franking credits, which eligible Australian residents could be entitled to use to offset their tax, its dividend yield blows out to 7%.
ASX Bank Share Dividends (fully franked)
As can be seen in the chart above, CBA is forecast to yield a dividend slightly lower than Australia and New Zealand Banking Group (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB).
However, the dividend yield from each of the banks is well over the measly 2.5% offered from term deposits and savings accounts. What's more, a big part of the reason CBA's dividend yield is lower than its peers is because it's share price has risen sharply.
Over the past year, shares in Australia's largest company have rallied nearly 18%.
Is the dividend sustainable?
Recently, I said CBA's shares are not a buy. Barring any unforeseen economic shocks, I think a good price to buy the bank's shares would be around $70. At their current price of nearly $86, the valuation just doesn't stack up.
However, the dividend income from CBA looks good. A housing market crash or rising unemployment might force the bank to lower its dividend payment, which would not be welcome news. But the bank appears set to continue paying a consistent dividend in the next few years.
Foolish Takeaway
Analysts continue to forecast healthy dividend payments from CBA in coming years. However, while they may indeed be correct in suggesting more of the same, I think it's important to maintain a well-diversified portfolio and buy at compelling valuations. Unfortunately, investors are not being offered standout value today, in my opinion.
