Commonwealth Bank of Australia (ASX: CBA) shares have historically been viewed as a top pick for passive income due to the stability and growth they have delivered to investors.
The banking landscape has changed significantly over the past 10 years, with increasing numbers of borrowers using mortgage brokers and a rising challenge from Macquarie Group Ltd (ASX: MQG).
On the mortgage broker challenger, CBA has a large majority of mortgage flow of borrowers coming through proprietary channels. In other words, it doesn't rely on mortgage brokers as much compared to other banks like Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).
However, Macquarie could put a brake on Commonwealth Bank's earnings growth, along with the Federal budget taxation changes. Let's see what it could take to earn $10,000 of passive income from the ASX bank share in FY27.
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Projected dividend for FY27
The independent forecast on Commsec suggests the major ASX bank share could hike its annual dividend per CBA share by 1% in FY27 compared to the projected payout for FY26. That possible annual payment could be $5.15 per share for FY27.
At the time of writing, that translates into a grossed-up dividend yield of 4.3%, including franking credits, or 3% excluding the franking credits.
If I were a shareholder, any growth would be better than none. However, 1% growth isn't even enough to offset typical inflation in a normal year. Of course, a forecast is not guaranteed to come true. Hopefully the ASX bank share can deliver a better outcome than what's currently projected.
How many CBA shares do I need to make $10,000 of passive income?
Long-term shareholders can be happy with the upcoming potential dividends because they still represent significantly larger payouts than 20 or 30 years ago.
If CBA does indeed pay an annual dividend per share of $5.15 in FY27, then an investor would need to own 1,942 CBA shares to receive $10,000 of passive income. If we're including franking credits as part of the income goal, then an investor would only need to own 1,360 CBA shares to receive the desired level of passive income.
Is this a good time to buy into Commonwealth Bank? Expert analysts don't think so. According to Commsec, currently there are 14 sell ratings, two hold ratings and no buy ratings on the ASX bank share. There are a lot of other ASX shares that could be better buys.
