Owners of Bank of Queensland Ltd (ASX: BOQ) shares might be in for a shock next week when the company reveals its half-year earnings and interim dividend.
The bank gave market watchers a sneak peek into its expected results for the first half of financial year 2023 today. And revealed it expects to post its smallest dividend in two years.
Right now, the Bank of Queensland share price is $6.455, 0.54% lower than its previous close.
For comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.34% at the time of writing.
Let's dive into what Bank of Queensland shareholders might expect from the company's earnings before they drop on Thursday.
Will Bank of Queensland slash its dividend by 9%?
The Bank of Queensland share price is in the red on Friday amid the revelation of key elements of its upcoming first-half earnings report. Here are the takeaways that might interest investors:
- It will post a $4 million statutory net profit after tax (NPAT) – a 98% fall on the prior comparable period's $212 million statutory NPAT
- That includes a $200 million non-cash write-down of goodwill and a $60 million provision for an Integrated Risk Program
- Its unaudited cash earnings came to $256 million last half – a 4.6% year-on-year tumble
- Finally, the bank intends to pay a 20 cent per share, fully franked interim dividend
If the upcoming dividend is indeed worth just 20 cents per share, it will mark a 9% fall on the prior comparable period's 22-cent per share payout.
It would also be a whopping 16.6% lower than the 24-cent per share final dividend paid out in November.
Though, it would leave Bank of Queensland with a 6.8% dividend yield, considering its current share price and final dividend. That's largely due to the 19.5% tumble posted by the stock over the last 12 months.
The upcoming dividend is subject to the finalisation of audited accounts and regulatory approval.
The bank also intends to operate its dividend reinvestment plan (DRP) at a 1.5% discount for the offer.
Brokers' response
The likelihood of a 20-cent interim dividend may have taken Goldman Sachs by surprise.
It previously tipped the Bank of Queensland to declare $244 million of cash earnings and a 24-cent per share offering. That was more bearish outlook than consensus estimates at the time, my Fool colleague James reported.
In responding to today's news, the broker noted a 20-cent dividend would represent a payout ratio of just 51%. That's compared to the ASX 200 bank's targeted payout range of 60% to 75%.
The broker has a neutral rating and a $7.21 price target on Bank of Queensland shares.
