Why this ASX share could be the best bank buy for dividends after the FY25 result

This bank is delivering solid earnings and dividends.

The ASX bank share MyState Ltd (ASX: MYS) is not one of the most well-known companies in the industry, but it has a lot to offer for investors, in my view.

It's a financial institution with a presence across Australia. Its merger with Auswide means its biggest four exposures are Queensland, Victoria, Tasmania, and New South Wales.  

MyState is a small business compared to the big four banks of Commonwealth Bank of Australia (ASX: CBA), ANZ Group Holdings Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC), and National Australia Bank Ltd (ASX: NAB).

Pleasingly, MyState is delivering growth for investors, which is helping the underlying value of the business.

A woman puts money in her piggy bank all rugged up for the winter cold.

Image source: Getty Images

Growth for the ASX bank share

In the FY25 result, MyState reported total operating income growth of 22.4% to $186.6 million, core earnings growth of 16.1% to $59.7 million, and underlying net profit after tax (NPAT) growth of 17% to $41.3 million.

Those numbers were driven by the merger with Auswide, leading to customer loan growth of 62% to $12.9 billion, and customer deposit growth of 71% to $10.1 billion.

The merger is expected to deliver significant synergies for the ASX bank share. In the four months since the merger was completed, annualised synergies of $8.4 million have already been achieved. Over a three-year period, annual pre-tax synergies of between $20 million and $25 million are expected.

MyState also noted that Auswide has launched a new partnership with Elders Ltd (ASX: ELD) to distribute its banking products through Elders' extensive rural network. Those products include arm management deposits, term deposits, cash management accounts, and savings accounts.

I'm expecting the business to deliver pleasing underlying earnings per share (EPS) growth in FY26 and beyond.

Solid dividend

The board of directors decided to declare a final dividend of 11 cents per share with the FY25 result, up from 10.5 cents per share in the HY25 report.

That brought the FY25 annual dividend to 21.5 cents per share, which translates into a grossed-up dividend yield of approximately 7%, including franking credits.

If the ASX bank share maintains the same dividend payout ratio, then earnings growth can help the company grow its dividend in the coming years.

Compelling forecasts for the ASX bank shares

The predictions on Commsec suggest the business could generate EPS of 32.9 cents in FY26 and 40.7 cents in FY27. That means it's trading at 13x FY26's estimated earnings and 10.6x FY27's estimated earnings. With that earnings outlook, I think it's trading at a low price-earnings (P/E) ratio for the potential growth.

The Commsec forecast also suggests the annual dividend per share could grow to 22 cents in FY26 and then 26 cents in FY27. At the time of writing, that translates into a grossed-up dividend yield, including franking credits, of 7.3% in FY26 and 8.6% in FY27.

I think the next two years look very compelling for the ASX bank share.

Motley Fool contributor Tristan Harrison has positions in Elders. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

couple happily discussing their issues with a banker
Bank Shares

Bendigo and Adelaide Bank vs Bank of Queensland: Which is better value?

Comparing Bendigo and Adelaide Bank vs Bank of Queensland shares: which regional bank looks better value on recent fundamentals and…

Read more »

Four business people wearing formal business suits and ties walk abreast on a wide paved surface with their long shadows falling on the ground ahead of them.
Bank Shares

Westpac vs Macquarie Group: Which bank is better value now?

Westpac vs Macquarie Group: which bank share offers Aussies better value for October? Here’s how the heavyweights compare on dividends,…

Read more »

Australian dollar notes in businessman pocket suit, symbolising ex dividend day.
Bank Shares

If I invest $8,000 in CBA shares, what passive income could I earn in FY27 and FY28?

Brokers aren't too bullish about the outlook for the bank shares over the next 12 months, but its passive income…

Read more »

Couple using their digital tablet together.
Bank Shares

Are CBA shares still worth buying near $150?

I look at whether the recent pullback has made this major bank more attractive today.

Read more »

Bank written on a brown building.
Bank Shares

Westpac vs NAB shares: Which big bank is the better buy?

I compare Westpac and NAB shares for value, yield and momentum – here’s which bank I’d buy now.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Bank Shares

If I invest $10,000 in CBA shares today, what could they be worth in October 2027?

Find out what brokers expect next out of CBA shares.

Read more »

Piles of increasing coins on Australian $100 notes.
Bank Shares

By October 2027, $5,000 invested in this ASX bank stock could turn into…

Guess how much upside is expected out of this ASX stock!

Read more »

Happy young woman saving money in a piggy bank.
Bank Shares

If I invest $10,000 in ANZ shares, what passive income could I receive in FY27?

Are you invested into ANZ shares? Here's what you could earn.

Read more »