National Australia Bank Ltd (ASX: NAB) shares may be a compelling pick for dividends for the foreseeable future.
Banks can be useful for passive income because they often offer a generous dividend payout ratio and trade at a relatively low price-to-earnings (P/E) ratio compared to other sectors.
NAB's dividend yield is typically materially higher than that of Commonwealth Bank of Australia (ASX: CBA), making NAB more appealing.
We're going to take a look at how big the NAB dividend could be in the coming period and what it would take to generate $9,000 of passive income.
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NAB dividend projection
The ASX bank share has provided investors with a steady, slightly growing dividend over the last few years. The bank's consistent dividends have been pleasing, and analysts expect further solid payouts.
According to Commsec's projection, the business is expected to pay an annual dividend of $1.72 per share in FY27, a 1.2% year-over-year increase from FY26.
Dividend growth isn't guaranteed, but I think any growth is attractive in the current economic climate. Credit growth looks more challenging amid the Australian taxation changes and higher interest rates.
The biggest portion of NAB's earnings comes from lending to businesses. However, a weaker economic environment can be challenging for that segment.
If NAB does pay an annual dividend per share of $1.72 in FY27, that would be a dividend yield of 4.5% excluding franking credits and 6.3% including franking credits.
That's more passive income than what an Australian could get from a term deposit.
Let's take a look at what it would take to unlock $9,000 of annual passive income by owning NAB shares throughout FY27.
$9,000 passive income from the ASX bank shares
If investors are willing to own enough NAB shares, it could lead to significant passive income from the ASX bank share.
To generate $9,000 of passive income from NAB, if it pays $1.72 per share, an investor would need to own 5,233 NAB shares for that level of passive income cash.
However, if we also include franking credits in the income goal, an investor would need to own only 3,663 NAB shares.
NAB is certainly a potential option for dividends, but is the NAB share price actually an attractive opportunity?
According to the Commsec collation of analyst recommendations, there are currently 16 ratings. Four of them are a sell, nine of them are a hold and three are a buy rating.
Therefore, it seems like there are better ASX share opportunities out there worth choosing first.
