At the current Commonwealth Bank of Australia (ASX: CBA) share price, could it offer the best dividend in the banking sector?
What's the FY21 CBA dividend going to be?
Only the CBA board know the answer to that question, and the board probably haven't even decided that yet considering FY21 is still ongoing.
But there are different estimates for what the CBA dividend could be. For example, Commsec has an FY21 estimate for the annual dividend of $3.15 per share. That could mean a forward grossed-up dividend yield of around 5.25%.
But brokers have different estimates for the dividend as well. On the high end, there's UBS with a dividend estimate of $3.60 per share, translating to a grossed-up dividend yield of 6% for FY21.
However, Credit Suisse has an annual dividend estimate of $3.10 per share, which represents a potential grossed-up dividend yield of 5.15% for FY21.
How does this compare to other ASX banks?
The CBA dividend is still going to be a lot lower than the pre-COVID-19 level, but the other big banks may not pay as much of a dividend either.
Let's look at the dividend estimates for the big four ASX banks, according to Commsec's numbers.
Australia and New Zealand Banking Group Ltd (ASX: ANZ) has a forecast grossed-up dividend yield of 9.7%.
Westpac Banking Corp (ASX: WBC) has a forecast grossed-up dividend yield of 9.1%.
National Australia Bank Ltd (ASX: NAB) has a forecast grossed-up dividend yield of 8%.
So, it seems that ANZ has the biggest forecast dividend for FY21 out of the big four banks.
However, there are also regional banks that may be able to pay a bigger dividend than that.
For FY21, Bank Of Queensland Limited (ASX: BOQ) has an expected grossed-up dividend yield of 8.8% and Bendigo and Adelaide Bank Ltd (ASX: BEN) has a forecast grossed-up dividend yield of 10%.
So it seems that Bendigo Bank has the largest dividend yield for FY21, but there is more to an investment than just the dividend. The direction of the profit is also imporant
How is CBA tracking?
CBA's half-year result included a cash profit decline of 10.8% to $3.9 billion. Net profit was supported by "strong business outcomes", but it was impacted by the low interest rate environment and COVID-19 loan impairment expenses.
One positive trend is that the consumer arrears are falling. At 30 June 2020, the home loan arrears that were overdue by more than 90 days was 0.63% – this had fallen to 0.57% at 31 December 2020.
The CBA common equity tier 1 (CET1) capital ratio was 12.6% at the end of the half-year period, making it one of the strongest in the banking sector. The bank remains well capitalised and this raises the possibility of a capital release by the bank in the future.
