Established in 1817, Westpac Banking Corp (ASX: WBC) is Australia's oldest bank and a firm favourite in many an ASX investor's portfolio.
And Westpac shares are enjoying a fruitful first half of 2024, hitting a new 52-week high of $28.05 mid-last week. Despite partially retreating to $26.55 as of Tuesday's close, the stock is still up by around 15% year to date.
As such, passive income investors considering buying into the ASX 200 banking stock right now might question whether Westpac presents decent value.
Let's take a closer look at the dividends on offer from the big four bank and see exactly how much juicy passive income could be coming your way if you're the proud owner of 1,000 Westpac shares.
What's the current Westpac dividend yield?
Westpac has a long history as a high-quality ASX dividend stock. It typically pays two fully-franked dividends to its shareholders each year.
Westpac's last annual dividend was $1.42 per share, representing a trailing yield of 5.3%, at the time of writing.
It's worth noting, however, that Westpac did declare a 90 cents per share interim dividend in its latest half-year results earlier this month.
This will consist of an ordinary dividend of 75 cents per share and a special dividend of 15 cents per share, thanks to the bank's strong cash position. It will be paid on 25 June.
Because this dividend hasn't officially been paid yet, I have based the trailing yield on the last two payments that have already been made.
Looking ahead, analysts at Goldman Sachs project dividends of $1.50 per share from Westpac in FY 2025. The broker expects another $1.50 per share payout the year after as well. This represents a forward dividend yield of 5.6% at the current Westpac share price.
But what does this mean in terms of cold hard cash in your pocket?
How much income would I receive if buying Westpac shares today?
If one were to buy 1,000 shares of Westpac at the current market value of $26.55 apiece, they would lay down an investment of $26,500.
Those 1,000 shares would produce $1,484 in annual dividend income ($26,500 x 5.6% = $1,484), exclusive of franking credits.
To continue generating this amount of annual income, obviously, Westpac would need to keep paying the $1.50 per share in dividends into perpetuity. If the dividend amount drops, naturally, so will the yield.
What do brokers think?
Following Westpac's half-year results, Goldman Sachs made no changes to its neutral rating on the bank's shares.
It retained a $24.10 price target, representing around 9% potential downside from the current Westpac share price.
Meanwhile, according to reporting from The Australian, Morgan Stanley estimates that revenue growth for the ASX banking sector will be soft this year.
Despite the neutral view, Westpac shares have decisively outperformed the S&P/ASX 200 Banks Index (ASX: XBK), which is up around 9% so far in 2024, compared to Westpac's gains of 15%. But as we know, past performance is no guarantee of future results.
So, while I think Westpac is a reputable company with a strong balance sheet and, therefore, a solid choice for ASX passive income investors, for me personally, I would rather hold off buying in the hope of achieving a slightly higher yield.
