Why the CBA dividend fountain will be in focus this week

Will the banking giant's next dividend be larger than its last?

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It's usually one of the biggest setpieces of the ASX earnings season, and this February, it's likely that Commonwealth Bank of Australia (ASX: CBA)'s latest report won't fail to live up to that reputation. And, as usual, the next CBA dividend is set to be centre stage.

CBA is scheduled to deliver its next half-yearly earnings report this Wednesday, 14 February. That's when we'll get the measure of how the six months to 31 December 2023 have treated the largest ASX 200 bank share.

It's also when we'll know just how big CBA's 2024 interim dividend is going to be. No doubt CBA's army of shareholders will be hoping for a very loving Valentine's gift from the bank.

Like most ASX blue-chip shares, CBA tends to pay out a dividend every six months.

Last year, investors were delighted when the bank dramatically upped its dividends over the previous year's payouts. The March interim dividend of $2.10 per share (fully franked of course) was a big jump over 2022's equivalent payout worth $1.75 per share. Likewise, CBA's September final dividend of $2.40 was another big leap higher compared to the prior payment of $2.10.

2023 was also a record year for CBA. The bank finally exceeded its previous record set in pre-COVID 2019 by forking out an annual $4.50 in dividends per share.

So could 2024 set an even fresher record? Will the cash flows from this dividend fountain of a stock get even stronger?

CBA dividend in focus this Valentine's Day

Sadly for investors, one ASX expert reckons it's not likely. As reported in The Sydney Morning Herald (SMH) this week, Brendan Sproules, banking analyst at Citi Group, is very wary of all of the bank stocks right now. And CBA in particular.

Sproules is expecting a mixed showing from the ASX bank on Wednesday. He told the SMH that he was anticipating CBA profits would beat consensus and "crack the $5 billion mark" thanks to lower bad debts.

However, he is going the other way when it comes to the bank's dividend. Sproules is pencilling in an interim dividend of $2.10 per share for 2024. That is 3% below the prevailing consensus amongst analysts and would mirror 2023's interim payment. Here's what he said on the matter:

We think the board will be wary of lifting the dividend when core earnings are falling [and as the bank heads] into a deteriorating credit quality environment.

For what it's worth, the report also quoted Andrew Triggs of JPMorgan. Triggs warned investors to watch out for falling margins at CBA, and also described the current CBA share price as "impossible to justify" at its current valuation.

Probably not the Valentine CBA investors are hoping for this Wednesday. But let's see what the bank comes out with.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended JPMorgan Chase. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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