The ASX bank share National Australia Bank Ltd (ASX: NAB) has long been seen as an attractive option for passive income. But, is a company's dividend history the only thing dividend investors should consider?
It's true that Australian companies can provide investors with pleasing levels of dividends, with franking credits being a very useful bonus.
Dividends play an important part of the overall returns that Aussies experience, particularly when it comes to blue-chip shares.
Before getting to whether the NAB share price is attractive, let's take a look at what the passive income could be for investors.
FY25 payout
For income-seeking investors, the next payment may be the most important.
We're still in the 2025 financial year, so we'll consider what the FY25 payout may be (bearing in mind the half-year interim payment has already been sent to shareholders). As a reminder, its half-year payout was 85 cents per share, a year-over-year increase of 1.2%.
The projection on Commsec suggests the ASX bank share could pay an annual dividend per share of $1.72. That translates into a fully franked dividend yield of 4.4% and a grossed-up dividend yield of 6.25%, including franking credits.
In a falling interest rate environment, NAB shares seem like a better choice for passive income than a NAB term deposit.
Future dividends
Investors shouldn't focus on short-term dividends. Does it seem as though payouts will continue flowing for the foreseeable future?
Unless a gigantic economic shock comes along (with COVID-19 being the latest time), I think NAB can continue paying sizeable dividends to shareholders.
The projection on Commsec suggests the ASX bank share could pay a larger dividend in FY26. The forecast currently suggests a possible dividend per share of $1.74. That suggests a possible fully franked dividend yield of 4.4% and a grossed-up dividend yield of 6.3%, including franking credits.
Is the NAB share price a buy?
Investors may be attracted to blue-chip businesses, but the bank doesn't seem cheap after rising more than 20% from 7 April 2025.
Firstly, banks like Commonwealth Bank of Australia (ASX: CBA) are looking to gain market share in business banking, which is where NAB specialises. Increased competition could lower NAB's margins and growth.
Secondly, NAB (and other banks) may see margin headwinds if the RBA continues cutting rates. Banks earn a return by lending out low/zero interest transaction account money – every RBA cut reduces those earnings.
Currently, according to a collation of analyst recommendations by Commsec, there are two buys, seven holds and six sells. While the average rating is hold, analysts are more negative than positive on the business.
