Westpac Banking Corp (ASX: WBC) shares are having a decent week.
Since the close of play on Friday, Australia's oldest bank's shares have risen over 2%.
This compares favourably to the S&P/ASX 200 Index (ASX: XJO), which is up only 0.1% over the same period.
The good news is that one leading broker still sees plenty of room for the bank's shares to keep rising.
But the even better news, at least for income investors, is that it continues to forecast very generous dividend yields this year and next.
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Should you buy Westpac shares for the dividend yield?
According to a recent note out of Morgans, its analysts have Westpac on their best ideas list again this month with an add rating and $24.22.
Based on the latest Westpac share price of $21.95, this implies a potential upside of 10% for investors over the next 12 months.
As for dividends, the broker has pencilled in fully franked dividends of $1.49 per share in FY 2023 and then $1.52 per share in FY 2024.
If these estimates prove accurate, investors buying Westpac shares today would receive dividend yields of 6.8% and 6.9%, respectively, over the next two financial years.
Why is the broker bullish?
Morgans is bullish on Westpac due to its belief that it has the best return on equity improvement potential among the big four. It explains:
We view WBC as having the greatest potential for return on equity improvement amongst the major banks if its business transformation initiatives prove successful. The sources of this improvement include improved loan origination and processing capability, cost reductions (including from divestments and cost-out), rapid leverage to higher rates environment, and reduced regulatory credit risk intensity of non-home loan book. Yield including franking is attractive for income-oriented investors, while the ROE improvement should deliver share price growth.
