The ASX bank share Westpac Banking Corp (ASX: WBC) has a reputation for paying good dividends and providing stable profits. After reporting its FY25 result, now is a good time to question if this is the right time to buy into the bank.
The report wasn't exactly thrilling – net profit after tax (NPAT) was reduced by 1% to $6.9 billion. After excluding notable items, net profit reduced by 2% year-over-year.
On the passive income side of things, the final dividend per share was hiked by 1 cent to 77 cents per share. This brought the full-year dividend to $1.53 per share, representing an increase of 2 cents per share, or 1%.
I'll always take a little bit of dividend growth over nothing at all. However, the fact that the dividend growth did not keep up with the rate of inflation was disappointing.
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Does the Westpac share price offer much turns?
Let's take a look at the dividend income first and how large the current payout is, in yield terms.
Based on the dividends from FY25, the bank has a grossed-up dividend yield of 5.6%, including franking credits.
That's a bigger yield than what we can get from a Westpac term deposit, but the yield is nowhere near as attractive as it used to be, following a 21% rise in the Westpac share price over the past year and 112% rise in the past five years.
The higher the share price goes, the lower the yield, unless the dividend payouts are hiked at a similar (or faster) pace.
Westpac continues to see challenges for the Australian economy, with challenges for small businesses across materials, labour and energy costs. RBA rate cuts have provided interest rate relief over the past year and this is helping fuel a modest recovery in private demand.
But, both inflation and unemployment have been increasing in recent months, which will be a "delicate balance" for the RBA to manage, according to Westpac.
This doesn't seem like an environment of strong credit growth for the ASX bank share, in my opinion. If Westpac can maintain its lending profitability (NIM), market share and bad debts, its profits could still perform relatively well.
According to CMC Markets, there are currently 11 ratings on the business, with six sell ratings and five ratings, with the average target price suggesting a fall of 14% over the next year.
Dividend projections
The current dividend projection on CMC Markets suggests that the ASX bank share's payout could increase to $1.56 per share in FY26 and rise again to $1.58 per share in FY27.
That suggests further slow improvement of the payouts, implying possible grossed-up dividend yields of 5.7% in FY26 and 5.8% in FY27.
Overall, it seems to me that this isn't the best time to buy Westpac shares.
