ASX bank stock Bank of Queensland Ltd (ASX: BOQ) has traded sideways and underperformed the sector over the past 12 months.
In that time, the stock underperformed its banking peers in the S&P/ASX 200 Banks (ASX: XBK) index nearly 17%.
At Friday's market close, the bank's shares were trading at $6.13 apiece, offering a dividend yield of 6.2%.
Fully franked, the yield jumps to 8.9%. Is this a ticket to passive income? Let's see what the experts think.
ASX bank stock for passive income
Bank of Queensland may not be a 'Big Four' bank, but its dividend yield certainly grabs my attention.
As the 2024 financial year wraps up, forecasts suggest BOQ could pay an annual dividend of 33.5 cents per share, according to my colleague Tristan.
This would give a yield of 5.5% on the current share price.
In FY25, consensus expects the dividend to rise to 34 cents per share, matching the yield at 5.5%.
Not all analysts are optimistic, however. UBS has a sell rating on BOQ, with a price target of $5.50. a downside potential of 10%.
UBS is concerned about potential pressure on the ASX bank stock's net interest margin (NIM). However, the broker acknowledges that potential acquisitions or capital returns could bring positives.
Potential for a turnaround
The ASX bank stock faces increasing competition, which has squeezed its NIM, along with a changing payments and lending landscape.
In the first half of FY24, BOQ's NIM dropped by 3 basis points to 1.55%. Cash earnings fell by 33% to $172 million.
Critically, the interim dividend was cut by 15% to 17 cents per share.
Even with its bearish view, UBS projects that BOQ's net profit will recover in the coming years. Profits are expected to rise by 8.8% in FY25 and 14.4% in FY26.
If these predictions hold, BOQ's share price and dividend payouts could improve.
Foolish takeout
The question is whether this ASX bank stock is a ticket to passive income.
Well, if you invest $10,000 in BOQ shares at the current price of $6.13, and BOQ made zero changes to its dividend, you could expect to receive approximately $620 in annual passive income, based on the trailing dividend yield of 6.2%.
When factoring in franking credits, which boost the gross yield to 8.9%, your income would increase to around $890.
But at UBS' forward dividend yield for FY25, this implies payouts of $550 before franking credits.
If the bank continues to pay a similar rate (34 cents in this instance), this could produce over $500 per year in annual passive income.
As always, past performance is no guarantee of future results, and remember to conduct your own due diligence.
