Can Commonwealth Bank of Australia (ASX: CBA) return to being a really good ASX dividend share again?
The big four ASX bank just released its FY21 third quarter result
which included another strong period of recovery from COVID-19.
Was the FY21 Q3 a strong one?
For the three months to 31 March 21, CBA generated $2.4 billion of statutory net profit.
Looking at the continuing cash net profit, CBA made $2.4 billion. That represented a 24%% increase on the quarterly average from the first half of FY21.
The result was largely driven by a big reduction in the loan impairment expense. That’s good news because it means the loan market and economy is getting stronger rather than weaker.
Nevertheless the company said that its loan provision remains strong and it’s maintaining a cautious approach to managing risks as the economic recovery from COVID-19 continues.
Turning to the common equity tier 1 (CET1) capital ratio, it increased by 10 basis points (0.10%) to 12.7% despite the payment of the interim dividend to shareholders. CBA’s balance sheet is in a very strong position.
What to make of this for the CBA share price
Seeing a recovery is definitely a positive for the bank and the economy at large.
As Australia’s largest bank, we can get the biggest indicator of the economic performance of Australia. It’s looking pretty good.
In terms of the dividend, CBA’s dividend saw a good half-on-half increase in the HY21 result.
Looking at the prediction on CommSec, CBA is expected to pay a dividend of $$3.16 per share in FY21. That would equate to a fully franked dividend yield of 3.3%.
Would that make it a great ASX dividend share again? Well, it depends on your definition of great.
Its dividend will be getting back to where it should be. But COVID-19 showed that bank dividends are not always reliable, particularly in a financial crisis.
In my opinion, there are other ASX dividend shares that can offer more growth and others that are more likely to be reliable during difficult times.
