Commonwealth Bank of Australia (ASX: CBA) shares are yielding annual dividends equivalent to 5% fully franked.
Track record
The chart above shows CBA's half-yearly dividend payments since the early 90's. As can be seen, though there have been times when growth in the dividend slowed the bank has consistently upped its payments to shareholders over time.
Payout ratio
The 'payout ratio' metric is calculated as dividends divided by profits. It gives you a sense of how much profit is being paid out as dividends to shareholders. Lower equals better because it means more profits could potentially be used for dividend payments in the future.
CBA's payout ratio is 77%, which is better than Westpac Banking Corp's (ASX: WBC) 84% and Australia and New Zealand Banking Group's (ASX: ANZ) 83%.
Outlook
Looking at the past and present is the easy part. But focusing on the future and outlook for a business is the only way to properly assess a company on the sharemarket. As Australia's largest bank, with its loan book growing strongly in recent years, CBA isn't going anywhere anytime soon.
Its investment in technology should also see its costs come down over time, which could boost its profits and dividends.
Buy, Hold or Sell
Commbank has proven to be one of the best dividend shares on the ASX. Aside from a severe market shock or recession, I see no reason why Commbank should cut its dividend in the near future.
However, as I have said repeatedly, Commbank shares are not a bargain investment at today's prices. Therefore, I'm holding off buying shares in CBA for the foreseeable future.
