As any seasoned Australian investor would know, most investors who buy ASX bank shares do so in the hopes of receiving oversized dividend income. ASX bank shares like Commonwealth Bank of Australia (ASX: CBA) have been paying hefty, fully-franked dividends for decades.
The past few years haven't done much to dent that reputation. But today, let's analyse the CBA dividend yield and how it compares to other ASX bank shares.
Right off the bat, it's worth pointing out that CBA has been dialling up its dividends in recent years. In 2020, CBA investors received an annual total of $2.98 per share in dividend income. In 2021, this rose to $3.50 per share, and again in 2022 to 43.85 per share.
The interim dividend that CommBank has paid out so far in 2023 – $2.10 per share – also represented a healthy year-on-year increase compared to the same dividend of $1.75 per share paid in 2022.
However, we are still not quite back to pre-COVID levels, and the days when Commonwealth Bank was forking out $4.31 in dividends per share annually.
But things are certainly appearing to be heading in the right direction for CBA's income investors.
How does the CBA dividend yield compare to the other ASX 200 bank shares?
But an ASX's share's raw dividend payments form only one-half of the dividend yield equation. The other half comes from the company's share price itself.
In CBA's case, this has been working against the bank's dividend yield. So while CBA has been ratcheting up its dividends over the past three years, its share price has also been rising to match it. Today, CBA shares are sitting at more than 15% above where the bank was just before the 2020 COVID crash, as you can see below:
This has had a mollifying effect on the CBA dividend yield. Today, the $4.20 per share that CBA has paid out in dividends over the past 12 months gives this ASX 200 bank share a trailing dividend yield of 3.98%.
While that is objectively still a strong yield, it does pale in comparison against some of CBA's banking peers. In fact, CBA today offers the lowest dividend yield out of any major ASX bank share.
Why is Commonwealth Bank last when it comes to income?
To illustrate, here's where the other ASX banks currently stand in terms of dividend yield:
| ASX bank share | Current dividend yield (trailing) |
| Commonwealth Bank of Australia (ASX: CBA) | 3.98% |
| National Australia Bank Ltd (ASX: NAB) | 5.71% |
| Westpac Banking Corp (ASX: WBC) | 6.03% |
| ANZ Group Holdings Ltd (ASX: ANZ) | 6.04% |
| Bank of Queensland Ltd (ASX: BOQ) | 7.35% |
| Bendigo and Adelaide Bank Ltd (ASX: BEN) | 5.99% |
| Macquarie Group Ltd (ASX: MQG) | 4.31% |
So CBA is the clear laggard here.
Shareholders might be asking CBA to show them the money right now. However, there is a pretty straightforward reason why this is the case. Put simply, CBA shares command a bit of a premium against all other ASX bank shares in terms of the market valuation investors are willing to assign it.
To illustrate, consider CBA shares' current price-to-earnings (P/E) ratio of 18.05. That is significantly higher than Westpac's 12.45 P/E ratio at present, NAB's 12.18 and ANZ's 10.91.
As we established earlier, a company's share price impacts its dividend yield just as much as its raw dividend payments. And because CBA is more expensive on a P/E ratio basis, the dividend yield it can offer investors is proportionately lower.
