Commonwealth Bank of Australia (ASX: CBA) shares have long been popular with passive income investors for the bank's reliable, twice yearly dividend payouts.
The S&P/ASX 200 Index (ASX: XJO) bank stock even paid two fully franked dividends in the pandemic addled year of 2020.
Looking at the last two payouts, CBA paid a final dividend of $2.60 a share on 29 September. And the big four bank just paid its interim dividend of $2.35 a share on 30 March.
Atop those fully franked dividends, CBA shares have also gained 11.5% in 12 months, outperforming the 8.3% one-year gains posted by the ASX 200.
But with the CommBank share price now having more than doubled over five years, closing at $172.82 on Thursday, is Australia's biggest bank still a good passive income play?
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Should you buy CBA shares for passive income?
Sanlam Private Wealth's Remo Greco recently ran his slide rule over the ASX bank stock (courtesy of The Bull).
"The bank is a quality company and a staple in investor portfolios," he said. "It has established a strong track record of performance over many years."
As for the passive income potential, Greco said:
The company delivered a 5% increase in statutory net profit after tax in the first half of fiscal year 2026. However, the dividend yield was trading below 3% on March 26, so better income is available elsewhere.
Indeed, at Thursday's closing price CBA shares trade on a fully franked trailing dividend yield of 2.9%.
That's significantly less than passive income investors were banking from the stock a few years ago.
For example, three years ago, on 31 March 2023, you could have bought CBA stock for $98.32 a share. And with an eye on the $4.20 a share in fully franked dividends the bank paid out over the prior 12 months, it was then trading on a trailing dividend yield of 4.3%.
Connecting the dots, Greco issued a sell recommendation on the big four bank.
He concluded:
The conflict in Iran suggests a possibly slowing global economy likely to impact credit growth in Australia's higher interest rate environment. CBA is trading at a premium to peers, so it may be time to consider reducing exposure in this volatile environment.
What kind of a premium does CommBank stock command?
CBA shares trade on a price to earnings (P/E) ratio of around 28 times.
As for the other big four Aussie banks: Westpac Banking Corp (ASX: WBC) trades on a P/E ratio of around 20 times; ANZ Group Holdings Ltd (ASX: ANZ) trades on a P/E ratio of around 19 times; and National Australia Bank Ltd (ASX: NAB) trades on a P/E ratio of around 19 times.
