Owners of Bank of Queensland Ltd (ASX: BOQ) shares are benefiting today. Not only are shareholders getting a lift in the value of their shares (with the BOQ share price currently up more than 7%), but the ASX bank share also announced a bigger dividend in its FY22 result.
BOQ said that the result, which saw statutory net profit after tax (NPAT) rise 15% to $426 million, reflected "good business momentum, tightly managed costs and improved portfolio quality".
Let's have a look at how much better the payout is.
FY22 BOQ dividend
The bank's board decided to declare a final ordinary dividend per share of 24 cents. This was an increase of 9% from the first half of FY22. It also represents a dividend payout ratio of 64.7% of cash earnings.
BOQ said that its cash earnings per share (EPS) increased by 5% to 78.4 cents per share for the year. The uplift was the result of higher underlying net profit after tax and the benefit of a full year of ME Bank earnings.
The bank's board increased the full-year dividend by 18% to 46 cents per share. That represents 58.7% of full-year cash EPS.
Not only did the higher profit support the bigger dividend, but BOQ also pointed to its common equity tier 1 (CET1) ratio of 9.57%, making it "unquestionably strong".
How big will the FY23 payment be?
The board told investors that its dividend payout ratio target range is between 60% to 75% of cash earnings.
However, BOQ cautioned that the amount of any dividend paid will be at the discretion of the board and depends on several factors – generating profit, having cash to distribute, expectations of future profit, or when the forecast timeframe for capital demands of the business allows for a "prudent" distribution to shareholders.
But, in terms of profit, in its outlook guidance, the ASX bank share outlined a number of positives that could lead to "quality sustainable profitable growth". This could be helpful for growth of the BOQ dividend.
BOQ is expecting market credit growth of 3.5% in housing and 6.5% in business. The bank is expecting growth ahead of the market, optimising margin, revenue, and returns. There is net growth across all of its brands, both retail and business.
The ASX bank share also pointed to positive momentum for its lending profitability, thanks to tailwinds from rising interest rates, partly offset by headwinds from wholesale funding.
But, there are cost headwinds from inflation and investing in building a digital bank. This will be partly offset by simplification and integration benefits.
BOQ is expecting positive jaws – that is, for revenue to grow faster than expenses.
BOQ dividend yield
Using the FY22 payout of 46 cents, Bank of Queensland has a grossed-up dividend yield of 9.1% at the current BOQ share price.
