Commonwealth Bank of Australia (ASX: CBA) shares have been a big presence on the ASX for a number of decades. Investors may be thinking about the ASX bank share as a passive income idea for dividends.
Banks can provide investors with consistent dividends thanks to the regular payments of loans by borrowers. However, economic disruptions can be problematic sometimes.
The bank’s challenges from the COVID-19 pandemic are now far off in the rear view mirror. Dividend payments have been growing since 2020, so we’ll see if the bank can continue that trend.
Promising estimates
The estimate on Commsec, which is provided by external analysts, suggests that the business could pay an annual dividend per share of $5.25, which would be a pleasing increase of around 8%, year on year.
If the business can increase its payout to $5.25, then the dividend yield would be 3.4%. If the likely franking credits are added in, the yield jumps close to 5%, which would be a solid level of income.
The dividend is projected to increase to $5.50 per share in FY27, which would be a 4.75% increase.
Is the Commonwealth Bank share price a buy?
It seems to trade more expensively than its main competitors of ANZ Group Holdings Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC). Plus, it’s not growing its loan book as quickly as Macquarie Group Ltd (ASX: MQG).
This doesn’t seem like a great time to buy CBA shares, with it trading at 23x FY26’s estimated earnings.
If Commonwealth Bank can lower its expense growth, while maintaining its loan growth momentum, then CBA could still surprise the market, then it could produce positive returns.
Other ASX dividend shares for passive income
Commonwealth Bank would not be the first business I’d buy for dividends.
There are other businesses with large dividend yields such as Future Generation Global Ltd (ASX: FGG) and Charter Hall Long WALE REIT (ASX: CLW), while others have a better record of dividend growth such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and APA Group (ASX: APA).
If I were investing for passive income, the above names would appeal to me much more today than Commonwealth Bank shares today.
