Bank of Queensland Ltd (ASX: BOQ) shareholders have been enduring a pretty rough time for this ASX 200 bank share over recent months. Bank of Queensland shares are today defying the ASX 200's sell-off.
At present, the Bank of Queensland share price has put on a decent 0.18% to $5.56 a share, which certainly looks a lot better than the ASX 200's fall of 0.96%.
But over the past three months, Bank of Queensland shares have shed a hefty 3.73% of their value. That stretches to 7.64% over the past six months, and to 18.3% over 2023 to date. Ouch.
However, the happy side effect of these falls is that it has lit a rocket under Bank of Queensland's current dividend yield. Today, Bank of Queensland shares offer a trailing dividend yield of 7.94%. If we include Bank of Queensland's typical full franking credits, this yield stretches all the way up to a grossed-up 11.34%.
That is obviously a pretty fat yield to consider. But, as any well-trained dividend investor would know, sometimes yields of that size are too good to be true and represent the treaded dividend trap.
So is this fat, 11% yield from Bank of Queensland shares for real?
Well, it's certainly not incorrect. Over the past 12 months, Bank of Queensland has paid out two dividends to its shareholders. The first was the November final dividend of 24 cents per share that we saw paid out last year. The second was the June interim dividend of 20 cents per share that we saw this year.
Together, that equates to a full-year dividend of 44 cents per share. Putting that into the current Bank of Queensland share price, and we get a grossed-up yield of 11.34%.
Is the 11% Bank of Queensland dividend yield too good to be true?
Now, it's worth pointing out that Bank of Queensland shares are scheduled to trade ex-dividend in a few day's time on Thursday, 26 October. That's in preparation for the bank's upcoming final dividend of 21 cents per share, which is set to be paid out on 16 November next month.
If we use this dividend for Bank of Queensland's current yield, rather than last year's equivalent payment, we instead get a dividend yield of 7.39% or 10.56% grossed-up.
Regardless of which dividend payments you want to use, it's clear that Bank of Queensland shares have a monstrous yield on display right now.
However, income investors should take note of what's going on with the bank's fundamentals.
Earlier this month, Bank of Queensland gave investors a look at its full-year results for the 2023 financial year. And it wasn't a pretty sight. Bank of Queensland reported a 70% collapse in statutory profits after tax to $124 million. That's in addition to an 8% drop in cash earnings to $450 million. The bank's net interest margin also fell, losing two basis points to 1.69%.
A company's dividends can only ever be as strong as its underlying fundamentals. And with earnings and profits falling, it's no wonder that Bank of Queensland was forced to trim its final dividend in 2023.
If Bank of Queensland can't right the ship and return to growth, then it's highly likely that investors will be facing even deeper dividend cuts next year.
So there's a good reason why Bank of Queensland shares are trading with such a high dividend yield right now. It seems ASX investors aren't convinced the bank will actually be yielding above 10% for very long. No doubt Bank of Queensland shareholders are hoping that isn't the case. But we'll just have to wait and see.
