Like all ASX bank stocks, Bank of Queensland Ltd (ASX: BOQ) shares have always been known as a viable option for investors seeking a sizeable stream of dividend income. However, Bank of Queensland is really standing out from the banking crowd at the moment.
Its peers in the big four stable currently offer dividend yields ranging from the low-3% range (Commonwealth Bank of Australia (ASX: CBA), of course) to the high 4% field for the others.
But Bank of Queensland shares? They are, at least at the time of writing, trading with a trailing dividend yield worth a whopping 6.39%. That's with the current share price of $6.26.
What's more, BoQ's dividends usually come fully franked as well. That makes for a potentially lucrative income investment indeed.
But can we really put Bank of Queensland in this bucket? After all, most dividend investors are sceptical of conspicuously high yields, and rightly so.
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Are Bank of Queensland shares a buy for that bulky dividend yield?
Well, there are a few things to note here. Although Bank of Queensland is a fine company, it is one that perpetually finds itself in tight spots. It can't match the size and scale of its big four peers, which limits just how profitable it can get. To illustrate, just take a look at this bank's long-term share price trajectory. Today, you can buy Bank of Queensland at half the price that you could have 20 years ago.
This indicates that this stock may be a relatively unreliable source of income. To prove it, consider that, over the past 12 months, BoQ shareholders have received a total of 40 cents per share in dividends. However, over the 2019 calendar year, investors bagged a total of 65 cents per share.
By now, you can probably see why the market is pricing this bank stock at a discount to its peers, and thus, a higher dividend yield.
So investors have to weigh up the potential risks of further dividend cuts with the potential reward of enjoying that 6.4% yield.
Depending on risk appetite, one could add Bank of Queensland to a well-diversified income portfolio of dividend stocks. But that's a call I'll leave to you, dear reader.
