Does the National Australia Bank Ltd (ASX: NAB) share price offer a good dividend yield?
NAB HY21 dividend
Well, it’s important to remember that a bank dividend is not like a term deposit. Bank dividends are not guaranteed at all. Just look at what happened during COVID-19.
NAB did just report its FY21 half-year result. In that, the NAB board decided to double the dividend to $0.60 per share. That was the same amount of a dividend as NAB paid in the entire 2020 financial year.
What does that translate into as a yield? Let’s assume that NAB pays another $0.60 per share dividend in six months.
An annual dividend of $1.20 translates into a fully franked dividend yield of 4.5%.
That’s pretty attractive on the face of it, in this low interest environment. The question is – what will the profit do? The profit is one of the biggest factors that influences the NAB share price over time. Or any business.
HY21 profit
The big four ASX bank reported that it generated $3.34 billion of cash earnings for the half, this was up 94.8% year on year.
The cash profit measure showed 35.1% growth year on year when excluding large notable items.
Statutory net profit came in at $3.21 billion.
The net interest margin (NIM) slightly declined to 1.74%. Excluding markets, treasury and large notable items, the NIM dropped 2 basis points. NAB told investors this reflects a lower earnings rate on deposits and capital due to the low interest rate world we’re living in. There was also competitive pressures, partly offset by lower funding costs and home loan repricing.
Is the NAB share price and dividend worth chasing?
In hindsight, a year ago was a great time to invest in ASX banks (and nearly every other ASX share).
The NAB share price has done well, so I think the share returns are going to be predominately from the dividend now. It can’t really take much more market share and population growth is going to be limited for at least the medium term.
I think there are other ASX dividend shares that may be able to offer better growth prospects.
