The Commonwealth Bank of Australia (ASX: CBA) share price has been rising in recent months, climbing more than 40% in the last year. It's delivering on capital growth, but we should look at the passive income potential of the business too.
As the biggest ASX bank share, the business is able to deliver scale benefits that most others in the sector would love to have.
CBA is rewarding shareholders with a dividend every six months. Let's take a look at how large the dividend currently is and what's expected of the bank.
Growing dividend
The ASX bank share has grown its dividend each year since the COVID-affected year of 2020.
The most recent result from CBA was the half-year report for the six months to 31 December 2024. With that result, the business decided to increase its interim dividend by 5% to $2.25 per share.
The last two dividends declared by the bank amount to $4.75 per share, resulting in a dividend yield of 2.6%, or 3.8% grossed-up (including franking credits) at the current CBA share price.
While the dividend isn't exactly rocketing higher, it is growing at a pleasing pace.
Passive income growth expected
Past dividend payments are historical. I think what's more important is what the business is going to pay to shareholders in the future.
The (independent) forecast on Commsec suggests the business could pay $5 per share in FY25. At the current CBA share price, that implies the business could have a grossed-up dividend yield of 4%, including franking credits.
In FY26, the projection on Commsec suggests the business could grow the annual payout by a further 8% in FY26 to $5.40 per share. This would translate into a grossed-up dividend yield of 4.3%.
While that's not the biggest dividend yield around, the trajectory of the dividend is positive.
Is the CBA share price a buy?
Investors shouldn't focus on just the dividend, though. CBA's valuation also needs to be evaluated.
According to the profit projection on Commsec, the ASX bank share is trading at more than 28x FY25's estimated earnings. That's far higher than Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and ANZ Group Holdings Ltd (ASX: ANZ), which is also why those businesses have higher dividend yields.
I think CBA is worthy of trading at a sizeable premium to its peers, but not as much as it is, in my opinion.
I don't think the CBA share price is a buy – there are plenty of ASX shares that seem better value.
