National Australia Bank Ltd (ASX: NAB) shares closed the session on Wednesday down 0.84% at $28.32.
All of the big four ASX 200 bank shares finished lower on the back of unexpectedly strong inflation data released by the Australian Bureau of Statistics today.
The S&P/ASX 200 Index (ASX: XJO) closed down 0.038% to 6,854.3 points.
Bank stocks have long been among the most popular ASX dividend shares held by income investors.
In a recent article, we pitted ASX bank shares against ASX mining shares to see which would pay more passive income via dividends to investors in FY24, based on CommSec analysts' forecasts.
Banking shares came out on top.
The consensus forecast dividend on NAB shares for FY24 is $1.68 per share, according to CommSec.
Let's see how this translates for ASX investors purchasing $10,000 worth of NAB shares at today's closing price.
How much passive income will NAB shares pay in FY24?
Okay, let's run the numbers.
The NAB share price closed at $28.32 on Wednesday.
With an investment budget of $10,000 (less a brokerage fee of $5), that buys you 352 NAB shares at a total cost of $9,968.64.
If we multiply 352 by $1.68, we get a total annual dividend of $591.36.
But NAB shares also pay dividends with 100% franking.
So, if we wanted to calculate the gross yield, including the benefit of that full franking, we'd do this.
$591.36 divided by 70 x 100 = $844.80.
On a purchase price of $28.32 per share, that brings the dividend yield to just over 5.9% before franking.
The gross dividend yield, including franking, is just below 8.5%.
How do NAB dividends compare to savings interest?
Pleasingly, it looks like NAB shares are set to pay above what even the best savings accounts are paying investors in interest today. That's important, given shares carry more risk than cash investments.
RateCity recently announced it has nine savings accounts on its panel paying interest of 5.5% or more.
The new annual inflation rate based on September quarter numbers reported today is 5.4%.
That means cash investments in savings accounts are barely covering inflation at the moment.
By comparison, many ASX dividend shares are forecast to pay above the new inflation rate, while also offering the prospects of capital growth.
For example, top broker Goldman Sachs believes the NAB share price will rise over the next year. It has a buy rating on the bank stock with a 12-month share price target of $30.51.
This implies a potential upside of 7.7% for investors who buy the ASX 200 bank share today.
Should you buy NAB shares?
My colleague Seb can help you out with this question. Check out his article analysing whether NAB shares are cheaper than other ASX 200 bank stocks.
Another colleague, Tristan, also took a look at investing in bank shares more generally in this article here.
NAB will announce its next dividend when it reports its full-year FY23 results on 9 November.
CommSec analysts estimate a final dividend of 84 cents for NAB shares in FY23.
