Some analysts think the National Australia Bank Ltd (ASX: NAB) dividend is about to be cut.
NAB is one of the four largest financial institutions in Australia in terms of market capitalisation, earnings and customers. However, in 2018, it was Australia’s largest lender to businesses and has operations in wealth management and residential lending.
Is NAB about to cut its dividend?
Some of the leading Australian analysts think that the NAB dividend is going to be cut in the near future, according to a piece in the Australian Financial Review.
The UBS analysts have described the NAB dividend as no longer viable because of sluggish growth and a higher share count.
NAB is taking large hits to its profit because of the Royal Commission with the major ASX bank recently announcing a very large remediation charge. There are worries that there could more charges to come as the bank is yet to finish its review of financial advisers.
The UBS analysts also explained that the number of NAB shares on the market has increased around 17% over the past five years.
Another reason that a NAB dividend cut could be on the cards is the fact that the Reserve Bank of New Zealand wants banks in New Zealand to hold more capital – which NAB could be short by around NZ$6 billion according to the analyst’s calculation.
How much could the NAB dividend be cut?
A popular guess by analysts is a potential cut of around 10% to bring the half yearly dividend to 90 cents. An annual dividend of $1.80 per share would mean the dividend yield would be 7%, or 10% including the franking credits.
This yield would still be attractive for income investors, but it would take a bit of the gloss off for shareholders. A high dividend yield is only useful if it is sustainable, just look at what has happened to Telstra Corporation Ltd’s (ASX: TLS) dividend over the past few years.
I would rather go for ASX shares that can display both income and growth characteristics, such as the proven businesses revealed in the free report below.
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