Is the Commonwealth Bank of Australia (ASX: CBA) share price a buy with dividend cuts happening everywhere on the ASX?
CBA's big ASX bank peers have already caused income disappointment. National Australia Bank Ltd (ASX: NAB) just cut its half-year dividend to just 30 cents per share. Australia and New Zealand Banking Group (ASX: ANZ) decided to defer its dividend until a later date.
Westpac Banking Corp (ASX: WBC) is scheduled to report next week. It's highly likely that the bank will cut or defer its dividend too. It has a lot of problems on its plate at the moment, including the coronavirus.
What will CBA do with its dividend?
I'm not sure at this point. We're still in the early stages of the impacts of the coronavirus effects. International travel could be hurt for quite a while. Immigration numbers could be very low for a long time.
The trailing dividend yield looks very good, but that's only because the CBA share price has fallen so much. A dividend cut seems unavoidable.
The fact that APRA wants all banks to materially reduce their dividends is a big sign that CBA will be forced to cut too. Don't forget that the Reserve Bank of New Zealand (RBNZ) has banned dividends for the time being, which stops the profit being sent to Australia.
CBA did decrease its dividend during the GFC. But it wasn't too bad, although Australia didn't actually suffer that much at the time (compared to the USA and Europe).
Is the CBA share price a buy?
The CBA share price fell 6% on Friday and it's down 35% since mid-February.
I think the CBA dividend will probably be the one that holds up the best due to its stronger balance sheet and higher-quality business. But for dividends I think there are plenty more better options out there such as Brickworks Limited (ASX: BKW) and Rural Funds Group (ASX: RFF).
