Each year, Australia's largest bank makes billions of dollars in profits and then shares it with its lucky shareholders.
For example, last month the bank released its FY 2023 results and reported a 13% increase in operating income to $27,237 million and a 6% lift in cash net profit after tax to $10,164 million.
This allowed the CBA board to declare a fully franked final dividend of $2.40 per share, which took its full-year dividend to $4.50. This represents a payout ratio of approximately 74%, which means in the region of $7.5 billion of its cash profit was returned to shareholders.
The good news is that more of the same is expected in the future, with the bank continuing to target a full-year payout ratio of 70% to 80% of cash profit. This could make it a great place for income investors to generate passive income.
But how much passive income would a $10,000 investment generate?
If we were to invest $10,000 into CBA's shares, then we would end up with 100 units at current prices.
According to a recent note out of UBS, its analysts are expecting CBA to increase its fully franked dividend by 6% to $4.76 per share in FY 2024.
If this forecast is accurate, then it would mean we generate $476 of passive income in FY 2024 from our 100 units.
And with the broker expecting the CBA dividend to then increase at $5.07 per share in FY 2025, that would mean another $507 payout is heading our way the year after.
In addition, although UBS isn't necessarily recommending CBA as a buy at present, it does see scope for some modest capital returns. It currently has a neutral rating and a $105 price target on the bank's shares. This suggests that our 100 units could be worth 5% more than they are now at $10,500.
If we include our passive income forecast, then the total 12-month return would be approximately 9.76% or $976.