We got some big news from one of the ASX’s biggest banking shares this morning. Westpac Banking Corp (ASX: WBC) today reported its half-year results for the 6 months ending 31 March.
We already covered the meat and potatoes of this announcement this morning, but the one figure that sums it all up is the $3.44 billion cash profit that the bank posted. That was up 189% on last year’s corresponding figure, and up 213% over the 6 months ending 30 September 2020.
It’s safe to say that investors have given these results a tick of approval, seeing as the Westpac share price is up 4.52% to $26.11 at the time of writing, and hit a new 52-week high of $26.14 earlier today, blitzing past the old 52-week high of $25.52.
Westpac announces new dividend
One of the more significant announcements that Westpac made today was its revelation of an interim dividend. Westpac will pay a fully franked 58 cents per share dividend on 25 June, with an ex-dividend date of 13 May.
This dividend is a significant increase over Westpac’s final dividend of 2020, which was paid out on 18 December last year, and came to 31 cents a share. However, it’s also still a ways away from the 80 cents per share that the company shelled out in December 2019, and even further from the 94 cent dividend that was common before that.
Westpac was notable for being the only ASX bank not to pay an interim dividend last year at all. That broke a decades-long streak of biannual dividends from Westpac. That has resulted in Westpac shares having a trailing dividend yield of just 1.2% today – not at all what ASX bank investors are used to from the big four.
So how much is this Westpac’s dividend worth now from a yield perspective?
Well, taking Westpac’s newly announced dividend together with its last payment, we get a figure of 89 cents a share. That equates to a trailing yield of 3.41%, or 4.87% grossed-up with full franking on the current share price. If we just take the new 58 cents per share dividend and annualise it, we get a potential forward yield of 4.44%, or 6.34% grossed-up. That’s starting to look like your typical ASX bank now.
Will the dividends keep growing?
As we noted earlier, there’s still a lot of distance between the dividends on offer from Westpac today, and the dividends it used to pay. However, the bank’s report today tells us that the new dividend only represents a payout ratio of 60% of earnings. In the ‘old days’, it was not uncommon to see Westpac pay out 80–90% of its earnings as dividends. That means that there could still be plenty of dividend growth to come for this ASX bank.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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