Westpac Banking Corp (ASX: WBC) shares are a popular option for Australian investors.
This is particularly the case for those with a penchant for passive income, with Australia's oldest bank among the most generous dividend payers on the Australian share market.
For example, in FY 2025, the bank's steady financial performance and strong capital position allowed its board to declare a final ordinary dividend of 77 cents per share with its full year results, taking its fully franked dividends to $1.53 per share for the year. This equates to a payout ratio of 75% of profit after tax, excluding notable items.
This represents a total payout of $5.2 billion to its 571,800 shareholders.
To put that into context, this is more than the market capitalisation of Breville Group Ltd (ASX: BRG) and Treasury Wine Estates Ltd (ASX: TWE).
But what sort of passive income could I earn from Westpac shares in the future? Let's take a look at what the market is expecting from the big four bank.
Passive income from Westpac shares
Let's first imagine that I have $100,000 to invest in the bank's shares. With the Westpac share price currently fetching $37.90, this means I could buy approximately 2,638 shares.
According to a recent note out of UBS, its analysts are expecting Westpac to increase its fully franked dividend to $1.70 per share in FY 2026.
This represents a dividend yield of almost 4.5% and would mean that those 2,638 Westpac shares would generate $4,484.60 in passive income.
The good news is that the broker believes that another increase is coming for shareholders in FY 2027. UBS has pencilled in a fully franked dividend of $1.75 per share for that financial year.
This represents a 4.6% dividend yield and would mean passive income of $4,616.50 for that $100,000 investment. Combined, investors are looking at a total of $9,101.10 across the two financial years.
It is worth noting, however, that the interim dividend for FY 2026 has just been paid. But barring a sudden cut in FY 2028, the actual dividend income paid out over the next 24 months shouldn't diverge too much from the above.
Should you invest?
Although UBS is very positive on the bank's outlook, it currently only has a neutral rating and $40.00 price target on Westpac's shares.
This implies potential upside of 5.5% for investors over the next 12 months. Together with forecast dividends, this means there's a total potential return of 10% if UBS is on the money with its recommendation.
