The Commonwealth Bank of Australia (ASX: CBA) share price would be slammed if it cut its dividend in 2017. Fortunately, there doesn't appear too many signs of a dividend cut.
CBA Dividends (half yearly)
As can be seen above, CBA shares have been an absolute gem for dividend income. In fact, last year, CBA shares paid full-year dividends of $4.20 per share. That compares to the bank's share price of $6 back in the 90's.
In other words, if you bought CBA shares back in the early 90's and still held today, you would have received a dividend equivalent to 70% of your original investment.
Will CBA cut its dividend?
Over the last week, we have seen Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd. (ASX: NAB), Westpac Banking Corp (ASX: WBC) and Macquarie Group Ltd (ASX: MQG) report their financial results.
CBA will report its March trading update on Tuesday.
Importantly, while each of the banks reported results mostly in-line with expectations, none of them cut their dividends. They also reported strong capital ratios and relatively low provisions for bad debts.
That's good news because bad debt charges come straight from profit, which is most commonly used to pay dividends. Further, their high capital ratios should help them deal with upcoming regulatory changes.
In the analyst community, the consensus also appears upbeat. According to FNArena, analysts covering CBA shares expect the bank to report a very modest 0.8% rise in its 2017 financial year dividends and another 1.5% growth in its 2018 financial year.
While analyst targets are best served with a pinch of salt and dose of scepticism, in my opinion, it is reassuring that analysts believe no headaches stand in front of CBA shareholders and another year of $4.20 in per-share dividend payments.
Foolish Takeaway
If you are investing for dividend income, it's hard to go past Australia's banks. However, I do not believe any of the big four bank shares are a buy at today's prices. Moreover, if you already hold 20% of your long-term share portfolio in bank shares, that's enough in my opinion.
