When an investor buys any ASX bank stock, but particularly one of the four major Australian banks, you can probably place a successful bet that it is at least in part due to the expectation of receiving a hefty dividend going forward. That's certainly the case for most investors who buy National Australia Bank Ltd (ASX: NAB) shares, I'd wager. NAB, like most of the big four banks, has been paying out fat, and fully franked, dividends for decades.
That has continued in 2025. Over this year, NAB has funded two dividend payments, as is the norm on the ASX. The first was the interim dividend from March, which saw investors bag 85 cents per share. The second was the December final dividend, also worth 85 cents per share.
Both payments came fully franked.
NAB shares have enjoyed a lucrative 2025 to date, even with the dip we saw in November. As it currently stands (at the time of writing), the bank has achieved a healthy 13.4% year-to-date return in 2025.
That's great.
At the present share price of $42.26, NAB is currently on a trailing dividend yield of 4.03%. When you consider that grosses up to 5.76% with the value of those full franking credits, we have a decent yielder on our hands.
Or do we? After all, an ASX dividend share's yield only reflects what the company has paid out over the last 12 months. Not what it will pay out going forward. There's no way to know what any ASX share will pay out in the future. Not until the company formally declares a dividend. As such, we have to venture into some educated guesswork.
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Is NAB's 4% dividend yield safe?
On the surface, NAB's dividend does look relatively safe. The bank's 2025 annual dividends represented a payout ratio of 73.3% of cash earnings. That's quite low by ASX bank standards, and within NAB's own policy of paying out between 65% and 75% of earnings.
However, there's arguably not much of a cushion if NAB's earnings fall in 2026, or the bank decides it wishes to use its capital for a different purpose.
Management has already stated its preference for share buybacks, with NAB chair Philip Chronican stating that "we retain a bias towards reducing the share count over time" earlier this month. That perhaps implies that NAB would rather cut its dividend than reduce its buybacks if cash becomes tight.
At least one expert reckons that's what's in store for NAB shares too. Analysts at Macquarie have recently forecast that NAB will trim its annual dividends from $1.70 per share to $1.50 a share by 2027 amid stagnant growth and pressure on NAB's earnings.
However, not all experts are so bearish on NAB's dividend. My Fool colleague recently went over the views of CMC Markets, which predict that NAB will be able to hold its payouts at around $1.70 per share for the next few years.
Foolish takeaway
It's difficult to predict what an ASX dividend share will pay out in the future at the best of times. But particularly so when there are experts offering different views. However, no one seems to think there is any sort of dividend growth in NAB's immediate future, so perhaps that should be the notion that investors take home.
