Is the National Australia Bank Ltd (ASX: NAB) share price a buy after the recent dividend cut?
If you didn't see the result, the main takeaway was that the NAB dividend was cut by 16% from 99 cents per share to 83 cents per share. A lot of older investors hold NAB shares for the income, so the cut might be a bit painful. ASX banks, like house prices, are not guaranteed performers.
NAB's statutory profit increased by 4.3% to $2.7 billion and cash earnings grew by 7.1% to $2.95 billion. However, cash earnings excluding restructuring related costs and customer related remediation was down 0.3% to $3.28 billion.
It wasn't a terrible result, but the customer remediation charges continue add up.
But, there were two negatives that really stuck out to me from the report. The first was that credit impairment charges increased to $449 million. In the second half of FY18 the credit impairment charge was $406 million and in the first half of FY18 it was $373 million. There's a clear negative trend.
The other thing that wasn't great was that loans more than 90 days past due increased to 0.79% of total loans, up from 0.71% in FY18.
On the one hand I think it was the right move that NAB decreased the dividend, particularly with the APRA CET1 10.5% ratio deadline looming – it's good for the balance sheet strength. But, a company decreasing the dividend is not a positive indicator for the near future.
Foolish takeaway
Assuming another 83 cents per share dividend is declared in six months, it's trading with a grossed-up dividend yield of 9.2%, which is still high. Indeed, that yield is higher than what's on offer from Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group (ASX: ANZ).
