The Bank of Queensland Limited (ASX: BOQ) dividend took a hit in the recent FY23 half-year result, and the BOQ share price suffered a corresponding fall. This may signal disappointment ahead for the upcoming payments.
Let's take a closer look at what may be ahead for the Bank of Queensland dividend.
Earnings recap
As a reminder for readers who didn't catch the recent report, the ASX bank share said that its cash earnings fell 4% to $256 million. The interim dividend per share dropped 9% to 20 cents per share after a 7% rise in operating expenses.
BOQ blamed stronger inflation and other costs including higher technology expenses and costs for "proactive customer contact, technology and cyber security".
There was also a loan impairment expense of $34 million for the period, compared to a credit of $15 million in the prior corresponding period. This reflected "continued uncertainty around future economic impacts of inflation and interest rate pressures", the bank said.
Its outlook regarding competition and the net interest margin (NIM) may have also worried the market. Indeed, it could have been an important factor in the Bank of Queensland share price decline that we can see on the chart below.
The bank said:
We expect to see heightened mortgage competition continuing as well as escalated deposit competition due to term funding facility refinancing, with interim margin compression anticipated.
Bank of Queensland dividend forecast for FY23 and FY24
The current projections on Commsec suggest BOQ's annual earnings per share (EPS) will fall in FY23 to 67.7 cents amid increasing banking competition. That profit could fund an annual dividend per share of 41 cents per share, according to the forecast. This would be a decline of 11%.
The grossed-up dividend yield for FY23 could be 10.4% at this lower Bank of Queensland share price.
If the annual dividend projection turns around to be correct, the final dividend could fall 12.5% to 21 cents per share.
The forecasts on Commsec then suggest another fall of the EPS to 60 cents per share, but that could be strong enough for BOQ to pay a slightly higher dividend of 42 cents per share. That would be a 2.4% increase compared to FY23. The FY24 projected annual dividend per share could be a grossed-up dividend yield of 10.6%.
Foolish takeaway
BOQ is predicted to keep paying sizeable dividends but the Bank of Queensland share price and dividend have fallen, so it's not going in the right direction for shareholders.
The key factor could be if it can stabilise its expenses while holding onto any NIM gains for its lending profitability. However, cost inflation and banking competition may be outside its control.
