National Australia Bank Ltd (ASX: NAB) shares have been on form this year.
Since the start of 2024, the banking giant's shares have risen almost 20% and currently sit at $36.81, which is just a fraction away from a 52-week high.
As a comparison, the ASX 200 index is up approximately 5% over the same period.
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Why are NAB shares outperforming?
Investors have been buying NAB shares this year thanks to the bank's stronger than expected performance.
After outperforming with its first half results earlier this year, the bank followed this up with a solid quarterly update this month.
NAB reported a 1% decline in revenue, a 2% decline in underlying earnings, and slightly lower cash earnings at $1.75 billion.
In light of this, let's now take a look and see if analysts have changed their estimates for its dividends in the coming years.
What's next for the NAB dividend?
According to a note out of Goldman Sachs, its analysts are expecting the big four bank to declare an 85 cents per share fully franked final dividend in November with its full year results. This will bring its total dividends for FY 2024 to $1.68 per share, which represents a modest increase on last year's $1.67 per share dividend.
Based on the latest NAB share price, this will mean an attractive full year dividend yield of 4.55% for investors to look forward to.
Moving onto FY 2025, the broker continues to believe that the NAB board will keep its dividend on hold at current levels. It is forecasting another $1.68 per share fully franked dividend for shareholders. This will of course mean another 4.55% dividend yield.
Goldman expects it to be three years in a row in FY 2026, with its analysts pencilling in another $1.68 per share fully franked dividend for shareholders. This will mean another 4.55% dividend yield based on where its shares trade today.
Should you invest?
Goldman Sachs is currently sitting on the fence when it comes to NAB shares.
The broker responded to its quarterly update by retaining its neutral rating with an improved price target of $34.24. It said:
We are Neutral-rated on NAB given i) while we are attracted to NAB's SME exposures (which is driven more by service proposition as opposed pricing which allows for better NIM management than housing lending), the stock's valuation is difficult to justify. NAB is trading on a 12-mo forward PER of 15.9x, at the 98th percentile versus a 15-year history, and the 15-year average of 12.3x, and ii) although NAB is further through its productivity program than peers, we believe it may become increasingly difficult to sustain its current pipeline of productivity benefits into outer years.
