Commonwealth Bank of Australia (ASX: CBA) shares have fallen around 10% after the ASX bank share reported its FY26 first quarter update. Even after that decline, I think there are other ASX dividend shares that could be better options for passive income.
CBA is widely seen as the highest-quality bank in Australia, but it's in a competitive industry where both growth and margins are challenged. Names like Macquarie Group Ltd (ASX: MQG), National Australia Bank Ltd (ASX: NAB), ANZ Group Holdings Ltd (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) would all love to take some of CBA's market share.
In my mind, there are (at least) two ASX blue-chip shares that I'd prefer.
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Wesfarmers Ltd (ASX: WES)
Wesfarmers is a major Australian retail company which owns a number of leading retail businesses including Kmart, Bunnings, Officeworks and Target.
I think Kmart and Bunnings have carved out a pleasing market position in their respective areas of the retail industry. Their ability to offer great value products and still deliver strong margins is impressive.
In the FY25 result, Kmart delivered a return on capital (ROC) of 67.6% and Bunnings achieved a ROC of 71.5%.
Despite the challenging retail environment, Wesfarmers was able to deliver growth in FY25 for shareholders, with revenue rising 3.4%, underlying net profit growth of 3.8% and full-year dividend growth of 4%.
The business has a variety of levers to pull for growth, including expansion in its existing core businesses and diversification into areas like lithium mining and healthcare. I think it can deliver more growth than CBA shares over the next few years.
According to the forecast on CMC Markets, the ASX dividend share is projected to pay an annual passive dividend income per share of $2.20. That translates into a grossed-up dividend yield of around 4%, including franking credits, at the time of writing.
I'm optimistic that the company can continue growing its volume of Anko products sold overseas, including in the Philippines.
Telstra Group Ltd (ASX: TLS)
Telstra is Australia's leading telco, with the most subscribers, the biggest network, the best spectrum assets and so on.
The company has been on a pleasing run in the last few years with a return to dividend growth for shareholders.
Telstra's main earnings generator is the mobile division and it's seeing both growing subscriber numbers and rising average revenue per user (ARPU). As the revenue rises, the company's profit margins can increase, enabling profit to rise faster than revenue.
Profit is normally what investors value a business on. It's also what funds the dividend.
The CMC Markets forecast suggests the ASX dividend share could pay an annual passive dividend income per share of 20 cents in FY26. That translates into a forward grossed-up dividend yield of 5.8%, including franking credits, at the time of writing.
With the increasingly digital nature of Australia's economy, I think Telstra has a promising future in an industry that isn't as competitive as the banking sector.
