The Westpac Banking Corp (ASX: WBC) share price is having another nasty day today, falling 0.42% to $17.72 a share at the time of writing. This might not come as much of a surprise – Westpac shares have been trading pretty much at this level since early June.
The Westpac share price remains depressingly low in 2020, still down 26% year to date. In fact, you'd have to go back to the depths of the global financial crisis in early 2009 to find a time before 2020 that Westpac shares were this low.
The move yesterday comes after Westpac released its full-year results for the 12 months ending 30 September. You can see our full coverage here, but long story short, it wasn't a pretty sight. Net profits were down 66%, and earnings per share (EPS) were down 63% to 72.5 cents.
But it was interesting to see what Westpac would pull out of its hat in terms of dividends. This ASX bank declined to even pay an interim dividend this year in light of the coronavirus pandemic, in addition to a record $1.3 billion fine. It was the first time Westpac hasn't paid a biannual dividend since 1986.
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Westpac finally coughs up a dividend
That, no doubt, would have been disappointing for shareholders, who had to watch Westpac's banking stable mates Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) all pay interim dividends earlier in the year. In fact, Commonwealth Bank shareholders have 'only' seen their dividends fall from $4.31 per share in 2019 to $2.98 a share in 2020.
But the drought for Westpac has finally broken. Westpac revealed that it will be paying a final dividend of 31 cents per share on 18 December, fully franked at 30%. That will come as some relief for shareholders, but pales in comparison to what they are used to. Last year, Westpac paid out $1.74 per share in dividends, and in 2018, $1.88.
On the current Westpac share price, this new dividend of 31 cents a share (assuming 62 cents a year) would give shareholders an annualised dividend yield of 3.48%, or 4.97% grossed-up with full franking. While Westpac might get back to its former glory days of $1.88 in annual dividend payments eventually, the banking sector is facing strong headwinds right now, including near-zero interest rates and a sluggish Australian economy. It might not be the 6–8% dividend yield that Westpac shareholders have been used to, but this is the new reality for the ASX banking sector.
