I'd call Macquarie Group Ltd (ASX: MQG) one of the best ASX financial shares in Australia. However, I wouldn't describe the Macquarie dividend as a leading option for passive income.
There's a lot to like about the company, with its diversified earnings across different financial activities, including asset management, retail banking and investment banking.
Another appealing factor is that around two-thirds of its earnings come from overseas, unlike the domestic-focused ASX bank shares that earn nearly all of their profit in Australia and New Zealand.
Macquarie has demonstrated its ability to deliver long-term growth. But, its dividend appeal is a different issue, in my view. Let's dig in.
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Lower dividend yield
Macquarie is one of the largest financial institutions on the ASX, but its dividend yields aren't correspondingly high.
A dividend yield comprises two factors – the dividend payout ratio and the price/earnings (P/E) ratio. In other words, how much of the annual profit is paid to shareholders and what earnings multiple is the business trading at?
Sometimes, Macquarie picks a lower dividend payout ratio than peers like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).
In FY24, Macquarie's board of directors decided on a dividend payout ratio of 70%. According to the forecasts on Commsec, Macquarie is projected to pay a dividend per share of $7 in FY25, representing a dividend payout ratio of approximately 66% of net profit after tax (NPAT).
At the current Macquarie share price, that represents a (partially franked) dividend yield of 3.4%. That's not bad, but we can get a better savings rate from one of Macquarie's savings accounts.
Plenty of ASX dividend shares can offer a stronger dividend yield. However, there's one reason why the Macquarie dividend can become more appealing.
Growth
Macquarie has done a great job at directing its capital towards long-term growth opportunities. The company has grown its earnings significantly over the past 10 or 15 years.
A growing profit can help fund higher dividend payments, too.
Macquarie is projected to increase its payout by 8.6% to $7.60 per share in FY26, translating into a (partially franked) dividend yield of 3.7%.
The broker UBS' forecasts suggest the Macquarie dividend yield could reach more than 5% by FY29.
New capital notes?
Macquarie announced on Friday morning that it is considering the potential launch of a new capital notes offer.
It's being considered as part of Macquarie's regular capital and funding strategy. Macquarie will appoint Macquarie Capital as sole arranger and joint lead manager, as well as a number of other joint lead managers and syndicate brokers. There is no guarantee this offer will proceed, though.
Macquarie share price snapshot
Since the start of 2024, Macquarie shares have lifted 11%, as shown in the chart below.
