When it comes to ASX dividend shares, it's likely Commonwealth Bank of Australia (ASX: CBA) is one of the companies that come to mind. All of the ASX 200 bank shares, including CBA, have been dividend heavyweights on the ASX 200 for decades now.
Over its long history on the share market, Commonwealth Bank has built a solid reputation as a steady and generous provider of fully franked dividend income.
But just because a company has amassed a reputation as an income share in the past doesn't automatically mean that it will continue to make it rain for investors indefinitely. So today, let's assess just how reliable the CBA dividend is in 2023.
When analysing the sustainability or reliability of a company's dividend, a great metric to start with is the dividend payout ratio. This determines how much of a company's earnings are being paid out in dividends every year.
If a company has a payout ratio of 50%, it is going to intrinsically have a more sustainable and reliable dividend than a company forking out 95% of its earnings to shareholders every year.
Just how reliable are CBA shares' dividends in 2023?
Back in February, CBA released its latest financial earnings report, covering the first half of FY2023. In these earnings, CBA revealed that its statutory net profit after tax (NPAT) rose 10% over the prior year to $5.22 billion. That translated into an earnings per share (EPS) metric of $3.04, up 31 cents over the prior year.
Out of that $3.04 in EPS, CBA announced that it would pay out a $2.10 per share interim dividend. $2.10 is just over 69% of $3.04. So we can conclude that CBA's dividend payout ratio for the first half of FY2023 was 69.08%.
Let's get a bigger picture though by analysing CBA's full-year results for FY2022 that were released last August.
Back then, the bank revealed that its EPS for FY2022 came in at $5.57 a share. That was a rise of 69 cents over FY2021. Of that $5.57, the bank doled out $3.85 in dividends per share. That gave CBA a payout ratio of 69.12%.
So CBA's payout ratio has been consistently at around 69% over the past year or two. I would class that as a healthy payout ratio for an ASX bank. This indicates that CBA's dividend is indeed relatively reliable and sustainable at its current levels.
Of course, banks are highly cyclical businesses. Thus, if CBA's earnings take a hit in the next year or so, we shouldn't be surprised to see a commensurate drop in its dividends. We saw this happen during COVID-ravaged 2020 and, before that, during the global financial crisis in 2008.
Nevertheless, CBA is, and I suspect will remain, one of the ASX 200's most generous dividend-paying shares. At present, the CBA share price gives this ASX bank a fully franked dividend yield of 4.24%.
