How much passive income would I make from 200 NAB shares?

This bank is paying a pretty large dividend

| More on:
Woman in a hammock relaxing, symbolising passive income.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Owning National Australia Bank Ltd (ASX: NAB) shares has been pleasing when it comes to receiving passive income in the form of dividends.

The ASX bank share sector collectively has quite a high dividend payout ratio, which pushes up the dividend yield. The other side to the equation is having a reasonable price/earnings (P/E) ratio.

The NAB share price has risen strongly over the past year, as we can see in the chart below.

After the bank's recent release of the FY24 first-half result, let's consider how big the dividend payouts might be in the future.

HY24 payout recap

NAB reported that its cash earnings of $3.55 billion for the six months to 31 March 2024 were down 12.8% year over year and down 3.1% half-on-half.

However, the diluted cash earnings per share (EPS) of $1.12 didn't drop as much – it fell 1.6% half-on-half and 12.3% year on year.

NAB decided to grow its interim dividend per share by 1.2% year over year to 84 cents per share. This was the same dividend as the FY23 second-half dividend. It represents a cash dividend payout ratio of 75%, which is generous and leaves some profit within the business for more growth.

That means the business currently has a fully franked dividend yield of around 5% and a grossed-up dividend yield of approximately 7%.

How much passive income would 200 NAB shares pay?

If NAB were to repeat the last two declared dividends as the next two dividends, it would be an annual payout of $1.68. Owning 200 NAB shares would mean receiving $336 of cash and $480 of grossed-up dividends if we include the franking credits.

But that's assuming the dividends don't change in the coming years. Some analysts think the NAB dividend may grow in the next few years.

The estimate on Commsec suggests the bank could pay a passive income of $1.70 per share in FY25 and $1.71 per share in FY26.

That means that if an investor owned 200 NAB shares, it could pay $340 in cash dividends and $486 in grossed-up dividends, with the franking credits as a bonus.

Outlook for NAB shares

The NAB dividend could be heavily influenced by how the economy performs for the foreseeable future. NAB had this to say regarding the economic outlook:

In Australia, household consumption growth slowed sharply in the second half of 2023, impacted by interest rates and cost of living pressures. This is weighing on real GDP growth which is expected to remain below-trend over the near term.

However, some relief is anticipated later this year with expected tax cuts and a forecast easing in monetary policy from November should inflation continue to moderate. Following 1.5% GDP growth over 2023, growth of 1.7% is forecast over 2024, before improving to around 2.25 % in 2025.

Pressure has eased in the labour market and wage growth is expected to slow from elevated rates in 2023. The unemployment rate is expected to continue to drift higher, peaking at around 4.5% by end 2024, but most indicators of labour demand remain healthy suggesting employment will continue to grow.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.

More on Share Market News

Young woman using computer laptop with hand on chin thinking about question, pensive expression.

Should you buy Telstra stock on a pullback?

Is this telco a buy for value hunters?

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Share Fallers

Why did the Core Lithium share price just crash 6%?

Investors are bidding down the Core Lithium share price today.

Read more »

Sports fans looking at smart phone representing surging pointsbet share price
Share Gainers

Guess which ASX All Ords share just rocketed 25% on an earnings upgrade

Investors are bidding up the ASX All Ords share following an improved FY 2024 earnings outlook.

Read more »

Young man sitting at a table in front of a row of pokie machines staring intently at a laptop. looking at the Crown Resorts share price
Mergers & Acquisitions

Are Star shares now rolling the dice on a rescue bid?

Rumour is that a US-based casino operator is ready to revamp this fallen star.

Read more »

A man closesly watch a clock, indicating a delay or timing issue on an ASX share price movement
Mergers & Acquisitions

BHP shares charging higher as the clock ticks down on the Anglo American takeover

BHP has less than three days before the clock runs down on its $64 billion Anglo American takeover bid.

Read more »

A bored woman looking at her computer, it's bad news.
Share Market News

These are the 10 most shorted ASX shares

Let's see which shares short sellers are targeting this week.

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
Broker Notes

Morgans says these ASX stocks can rise 20% (and pay big dividends!)

The broker believes some very big returns could be on the cards over the next 12 months.

Read more »

A happy male investor turns around on his chair to look at a friend while a laptop runs on his desk showing share price movements
Share Market News

5 things to watch on the ASX 200 on Monday

A positive start to the week is expected for Aussie investors.

Read more »