The major ASX bank shares are typically as seen as stable and sturdy options for passive income. The National Australia Bank Ltd (ASX: NAB) share price typically trades at a lower price/earnings (P/E) ratio than other sectors.
When the P/E ratio is lower, it means investors can receive a higher dividend yield.
In the FY25 result, NAB decided to pay an annual dividend per share of $1.70, which was 1 cent per share higher than FY24. At the time of writing, that translates into a trailing grossed-up dividend yield of around 6%, including franking credits.
Let's have a look at the likelihood of pleasing dividends in the coming years.
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Could the ASX bank share deliver good passive income?
At this stage, analysts are not expecting much dividend growth in the 2026 financial year, if any.
The forecast on CMC Markets suggests the bank may deliver another annual dividend per share of $1.70 in FY26. That would mean another grossed-up dividend yield of approximately 6%, including franking credits.
Shareholders could then see a slight increase of the annual payout to $1.705 per share in FY27, according to the projections. This possible dividend is so similar to the FY26 projected amount that the grossed-up dividend yield (including franking credits) still comes to around 6%.
That's not a bad passive income yield at all, though there are other ASX dividend shares out there with larger yields and have a stronger possibility of dividend growth.
Is the NAB share price a buy?
The more important question, I believe, is whether the ASX bank share is trading at an attractive valuation to buy. Dividends are only one part of overall returns – capital growth (and avoiding capital losses) is very important too.
UBS currently has a neutral rating on the ASX bank share, though it has a price target of $42.50. That implies a possible rise of 4%, which isn't very much.
There's a mixed view on the business among other analysts. According to CMC Markets, of nine recent ratings on the bank, there are four sell ratings, three hold ratings and two buy ratings.
According to the collation of analyst views on CMC Markets about the ASX bank share, the average price target is $39.40, implying a possible decline of around 4% over the next 12 months.
The most optimistic price target suggests a potential rise of just over 10%, at the time of writing. However, the most negative price target implies a possible decline of more than 20% in the next 12 months, so the likely passive income would not be enough to offset that.
Time will tell whether the bulls or the bears end up being right. For me, I wouldn't buy NAB shares at this stage if I were aiming for market-beating capital growth because of its limited earnings growth potential for the foreseeable future amid strong competition.
