Owning Westpac Banking Corp (ASX: WBC) shares has typically been a good move for investors focused on dividends. Aside from 2020, amid the COVID impacts, the ASX bank share has provided solid passive income over the past decade.
The bank is already such a huge business that it can afford to deliver a good dividend payout ratio and still invest in growing its earnings. The market isn't expecting a lot of growth from Westpac, so its price/earnings (P/E) ratio is not high – that also helps provide a good dividend yield.
The recent RBA rate hikes may help increase Westpac's earnings in the shorter-term because it's able to lend out transaction account balances (which have a low cost for Westpac) at a higher loan interest rate to borrowers.
Of course, higher rates are not all positive for ASX bank shares – it can increase the risk that some borrowers may default, so keep that in mind.
Having said all of that, let's take a look at the dividend projections for owners of Westpac shares for the next two years.
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FY26
So far in the 2026 financial year, investors have only seen how the ASX bank share performed in the three months to December 2025, being the first quarter of FY26.
We shouldn't necessarily expect how the first quarter went to repeat in each of the remaining quarters of FY26. The rate rises by the RBA alone will have an impact. Even so, it's good to know how the bank performed in that first quarter.
Westpac reported that its FY26 first-quarter profit was $1.9 billion. Compared to the quarterly average of the second half of FY25, this represented 5% growth, or 6% growth excluding notable items.
Pleasingly, the bank said that the proportion of new home lending through its own proprietary channel rose for the second consecutive quarter. To me, this likely means it's capturing more of the lending margin because it's not losing some of it to a mortgage broker.
Westpac also said that it saw strong growth in institutional lending and a higher proprietary lending mix in business.
The bank is also working on its UNITE initiative to make the bank more efficient and hopefully deliver better profit margins.
According to the projection on CMC Invest, Westpac paid an annual dividend per Westpac share of $1.605. If that happens, that translates into a grossed-up dividend yield of 5.4%, including franking credits.
FY27
Analysts can only guess what will happen to interest rates between now and the end of FY27, which partly depends on how quickly the inflationary situation in the Middle East is resolved.
But, for now, analysts are predicting that the company's 2027 financial year annual dividend can increase a little.
The projection on CMC Invest suggests the ASX bank share could hike its annual payout to $1.64 per Westpac share.
FY28
The last year of this series of projections is the 2028 financial year, which could see more slow-and-steady growth for the dividend payout.
If I were a shareholder, I wouldn't expect the bank to deliver significant payout growth because of banking competition pressures, but the bank could be capable of providing rising passive income.
In the 2028 financial year, the ASX bank share could pay an annual dividend per Westpac share of $1.70. That translates into a potential future grossed-up dividend yield of 5.7%, including franking credits.
