Why the CBA (ASX:CBA) share price will be on watch today

CBA shareholders could be rewarded this month.

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The Commonwealth Bank of Australia (ASX: CBA) share price will be one to watch on Tuesday morning. This comes after media reporting that Australia’s largest bank could boost its dividend to shareholders tomorrow.

The bank may also be poised to unlock $5.5 billion to buy back its shares through a series of off-market trades, according to reports.

At yesterday’s market close, CBA shares finished the day up 1.15% to $104.94.

Could CBA reward shareholders even more?

Investors will have their eyes peeled for the company’s FY21 financial results release tomorrow, with CBA shares in the spotlight.

According to the Australian Financial Review, the bank could boost its dividends payments to a reported $3.5 billion. This is in stark contrast to when the company declared a dividend of 98 cents for the 2HFY20 period. The result was an Australian Prudential Regulation Authority (APRA) rule that saw CBA preserve capital as a buffer against potential COVID-19 losses.

CBA had a difficult last year. The big bank had to navigate through the pandemic, which saw a large chunk of its loan payments deferred.

Last week, Goldman Sachs released a broker note forecasting the bank will substantially increase its dividend to finish FY21 out. As such, the investment firm is predicting CBA to pay a final dividend of $1.95 per share, plus a special dividend of $2.00 per share. This equates to a total payment of $5.45 for the entire FY21 financial year, representing a dividend yield of 5.2%.

It is worth noting that CBA’s position could change given the rapidly evolving situation with COVID-19. As such, Goldman Sachs noted, “there may be some risk to both the timing and magnitude of capital management”.

Do brokers think the CBA share price is a buy?

A number of brokers rated CBA shares with varying price points between July and August.

Goldman Sachs put a sell rating on CBA shares, reducing their 12-month price target to $81.87.

Australian investment house Morgans raised their rating by 4.1% to a bearish price of $76.00 per share. Whilst Bell Potter looked the other way, with a bullish price target of $105.00 for CBA shares.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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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