Today is payday for the shareholders of Westpac Banking Corp (ASX: WBC), with the banking giant planning to pay its final dividend of FY 2021 this morning.
Image source: Getty Images
Westpac dividend being paid today
At the start of November, Westpac released its full year results for FY 2021 and reported a 138% increase in statutory net profit to $5,458 million and a 105% jump in cash earnings to $5,352 million.
This was driven largely by a 144% increase in Business segment cash earnings to $1,789 million, which was supported by a more modest 12% increase in Westpac's Consumer business cash earnings to $3,081 million.
Together with its strong balance sheet, this allowed Westpac to announce a $3.5 billion buyback and declare a fully franked final dividend of $2.2 billion or 60 cents per share.
The latter brought its full year dividend to a total of 118 cents per share, which represents an increase of 280% over the COVID-impacted FY 2020 dividend and a payout ratio of 62%.
Dividend outlook
The good news for Westpac shareholders is that a number of brokers expect further dividend increases in the years to come.
For example, the team at Morgans has pencilled in a fully franked Westpac dividend of 123 cents per share in FY 2022 and then 162 cents per share in FY 2023.
Based on the current Westpac share price of $21.01, this implies very generous yields of 5.9% and 7.7%, respectively, for investors over the next two financial years.
Morgans also sees plenty of upside for Westpac's shares. It currently has an add rating and $29.50 price target, which suggests they could climb as much as 40% over the next 12 months.
The broker commented: "Westpac is our preferred major bank. While WBC stock is now being priced like it is a value trap, we do not believe it is a value trap."
