Does the Commonwealth Bank of Australia (ASX: CBA) share price offer the best bank dividend to investors?
Commonwealth Bank of Australia or CBA is Australia’s largest bank, with commanding market share of the mortgages (24%), credit cards (27%) and personal lending markets. It has 16.1 million customers, 14.1 million are in Australia. It is entrenched in the Australian payments ecosystem and financial marketplace.
Does CBA Offer The Best Bank Dividend?
The big four ASX banks of Commonwealth Bank of Australia, National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp
(ASX: WBC) are renowned for their large dividend yields.
However, on the dividend yield side of things, CBA actually has the lowest dividend yield.
All of them offer fully franked dividends, but CBA’s yield is ‘only’ 5.9%. ANZ’s fully franked yield is also 5.9%, Westpac has a 7% fully franked dividend yield and NAB’s fully franked yield is 7.8%.
Part of the difference can be explained in different dividend payout ratios. The more of their profits they pay out, the larger the dividend yield is. However, that also means they are re-investing less back into the business for future growth.
However, another key reason is that Commonwealth Bank is generally priced higher than the other three on most of the typical metrics that you measure a bank. That does not mean the share price, although CBA’s share price is coincidentally higher.
CBA is seen as the highest quality bank of the four. Over the past three decades it has run into trouble the least amount of times.
It is also the only bank that is slowly growing its dividend. In 2017 it increased its annual dividend per share from $4.20 to $4.29 and in 2018 it increased the dividend from $4.29 to $4.31. The other banks have kept their dividend at the same payment each year.
Is CBA a buy for its dividend?
CBA has the lowest dividend yield. If you’re after the largest starting dividend yield then that would appear to be NAB. However, CBA may well have the highest-quality dividend and could be the best one of the four to own.
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