It has been a very rewarding time to own Westpac Banking Corp (ASX: WBC) shares over the last 12 months, with a rise of more than 20% during that time period, as the below chart shows. But, that's not necessarily good news for the Westpac dividend yield.
When a share price falls, it boosts the potential dividend yield on offer. But, the reverse is true – when a share price rises, the dividend yield can fall if the dividend payout doesn't grow at the same pace. For prospective buyers, this is important because it impacts how much passive income they'll get.
We're going to look at what the Westpac dividend yield is projected to be in 2026.
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Westpac dividend yield projection
Using the forecast on Commsec, owners of Westpac shares could see the ASX bank share pay an annual dividend per share of $1.58 in 2026. That would represent a year-over-year rise of approximately 3.25% compared to the projected $1.53 per share for 2025.
At the time of writing and the current Westpac share price, it is forecast to provide a dividend yield of 4.1% excluding franking credits and 6% including franking credits.
That's not the biggest dividend yield around, though it is superior to its main ASX bank share competitor, Commonwealth Bank of Australia (ASX: CBA).
Is the ASX bank share attractive?
Analysts are certainly more pessimistic than optimistic about Westpac shares at the moment.
According to the collation of 15 analyst ratings on the business, there are no analysts that rate it as a buy. There are six hold ratings and nine sell ratings.
I'd agree with that general thought on the business. It has done well recently, but its valuation may now be (too) high for how earnings growth it's expected to deliver. The lower Westpac dividend yield is also less attractive.
Based on the earnings forecast on Commsec, Westpac is valued at 17x FY26's estimated earnings.
The bank is projected to grow earnings per share (EPS) by just 4% in FY26. In a competitive industry where bad debts can rise if lending is too risky, I'm not looking to invest at a relatively high price/earnings (P/E) ratio.
I think there can be a good time to buy Westpac shares, or any ASX bank share – during times of economic stress. Banks are exposed to the performance of the economy and the risks of certain industries, which can lead to a short-term decline in profitability and a loss of investor confidence. It's during those times of volatility that very attractive valuations can typically be found. I'd be happy to wait for an opportunity like that and focus on other ASX shares in the meantime.
