Commonwealth Bank of Australia (ASX: CBA) is one of the most widely owned shares on the Australian share market.
Even if you don't own the bank's shares directly, it is quite likely that your super fund will.
In light of this, the CBA dividend is vitally important to the wealth of most Australians.
But where is this payout heading in the future? Let's see what analysts are predicting for Australia's largest bank.
CBA dividend forecast through to 2027
As a reminder, last week CBA released its full year results and reported cash earnings of $9,836 million.
This allowed the CBA board to declare a fully franked final dividend of $2.50 per share, which lifted its total dividends for FY 2024 to $4.65 per share. This represents a 3% year on year increase. Pleasingly for shareholders, this dividend was ahead of the consensus estimate of $4.55 per share.
Looking ahead, according to a note out of Goldman Sachs, it is expecting CBA to post a small decrease in cash earnings to $9,726 million in FY 2025.
However, despite this earnings decline, the broker believes that the CBA dividend will remain on hold at $4.65 per share. Based on the current CBA share price of $138.13, this will mean a dividend yield of 3.4%.
In FY 2026, Goldman is expecting the banking giant's cash earnings to rise by a modest 0.7% to $9,797 million. In light of this, the broker believes the company will once again keep its dividend on hold at $4.65 per share. This will mean another dividend yield of 3.4% for investors to look forward to.
Finally, in FY 2027, Goldman Sachs expects a further 0.7% increase in cash earnings to $9,867 million. And it is forecasting the CBA dividend to be $4.65 per share for a fourth year in a row. As in previous years, this will mean another 3.4% dividend yield.
Should you invest?
Given its sky high valuation and below average dividend yield, the broker community is overwhelmingly bearish on CBA shares at present.
Goldman Sachs is among the most bearish brokers out there with a sell rating and $94.80 price target on its shares. This implies potential downside of over 30% for investors from current levels.
It commented:
We are Sell-rated on CBA given: While CBA's volume momentum in housing lending has improved and BDDs charges remain benign, we do not think this justifies the extent of CBA's valuation premium to peers. Coupled with i) a business mix that leaves it more exposed to the current competitive environment, and ii) while CBA has historically done a good job in balancing investment and productivity, we do not think it can escape elevated FY24E cost pressures given heightened inflation.
