Commonwealth Bank of Australia (ASX: CBA) shares are a popular option for income investors.
The banking giant's shares are held by over 800,000 Australian investors along with countless superannuation funds.
This means that when Australia's largest bank pays a dividend, millions of Aussies get a little bit richer.
In light of this, the trajectory of the CBA dividend is very important to many of us.
But where do analysts think it is heading following the bank's third quarter update last week? Let's see what Macquarie Group Ltd (ASX: MQG) is forecasting for the bank.
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CBA dividend forecast
According to a note out of the investment bank, the broker believes that CBA will pay a $2.66 per share fully franked dividend with its full year results in August.
This will bring its total dividends to $4.91 per share, which is an increase of 5.6% on the $4.65 per share it paid out to shareholders in FY 2024.
Based on the current CBA share price of $169.66, this would mean a dividend yield of 2.9%.
In FY 2026, Macquarie believes that are smaller increase will be happening. It has pencilled in a $4.98 per share fully franked dividend. This equates to a 2.9% dividend yield at current prices.
Finally, an even smaller increase to $5.02 per share is expected in FY 2027. This represents a fully franked 2.95% dividend yield for investors.
Are CBA shares a buy?
Unfortunately, Macquarie believes that CBA's shares are vastly overvalued at current levels.
In response to its quarterly update, the broker has reaffirmed its underperform rating with a lowly price target of $105.00. This suggests that downside of 38% is possible over the next 12 months.
Commenting on its sell recommendation, the broker said:
Despite a consistent and reasonably positive trading update, CBA remains expensive, trading at a ~26x FY25E P/E and a ~45-90% premium to peers. While we appreciate de-rating lacks near-term catalysts, we do not think the current valuation is fundamentally justified. Maintain Underperform.
Is anyone more positive?
None of the major brokers are willing to recommend CBA's shares to clients at current levels.
In fact, the broker with the highest valuation for CBA is Morgan Stanley. But with an underweight rating and $128.00 price target, it still sees potential downside of 25% for investors buying at current prices.
But that didn't stop investors bidding the bank's shares to a record high of $172.92 on Friday before they eased back at touch. Time will tell if this positive run continues.
