Is it just me or has National Australia Bank Ltd's (ASX: NAB) grossed-up dividend yield become a lot more appealing in recent months?
Indeed, since March, the dividend yield of shares in Australia's third largest bank has increased from just 5% fully franked to 6.4% fully franked – that's 9.2% grossed up!
The big increase in yield has probably got something to do with NAB's falling share price…
Source: Google Finance
…because as we know there are only two ways a dividend yield can increase so quickly:
- The company's board of directors declare a bigger payout to shareholders, and/or
- The company's share price falls dramatically
Since the board at NAB recently decided to keep its final dividend payout steady – taking the full year distribution to $1.98 – it is the falling share price which has boosted the dividend yield for NAB's prospective investors.
Are NAB shares a buy?
The rise of NAB's dividend yield, or fall in share price (depending on which way you look at it) has come despite the bank announcing a number of key operational achievements in 2015, such as the divestments of subsidiaries in both the US and the UK.
It also comes despite NAB announcing a strong profit rise in its most recent half-year reporting period.
As I recently wrote here, I think a great buying price for NAB shares could lie around $20. So given that NAB shares currently trade above $30 I won't buy anytime soon. No matter how high the dividend yield rises.
