Commonwealth Bank (ASX:CBA) tipped to increase dividend by 50% next week

The Commonwealth Bank of Australia (ASX: CBA) share price will be on watch as the market is expecting a big increase in dividends next week.

Should you invest $1,000 in Silver Lake Resources right now?

Before you buy Silver Lake Resources shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Silver Lake Resources wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

A row a pink piggy banks ranging in size from small to big, indicating ASX share price and dividends growth CBA bank dividend increase

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Commonwealth Bank of Australia (ASX: CBA) share price will be on watch as the market is expecting a big increase in dividends next week.

The CBA will be the first to give an indication whether investors' hopes of an ASX bank sector revival have been misplaced.

Expectations are high and that's why the sector outperformed the S&P/ASX 200 Index (Index:^AXJO) recently.

CBA's potential 50% dividend uplift

The average analyst forecast for CBA's upcoming interim dividend stands at $1.47 a share, according to the Australian Financial Review.

That's a 50% increase over the bank's greatly reduced final dividend of 98 cents that it paid last September.

That may not sound like a lot to shareholders as that equates to a modest yield of 3.4% (if you extrapolated the half-year payout). But this would rise to 4.8% if you can collect the franking credit.

More dividend growth for CBA

What's more, CBA typically pays a bigger final dividend. In the pre-COVID-19 years, the bank's final payment is 15.5% bigger than its half year dividend.

Also, if you believe the experts, dividends are set to continue rising as the sector continues to recover from the effects of the pandemic.

There's lots of room for dividends to recover too. Even if CBA lifts its dividend to $1.47, the bank used to pay an interim dividend of $2 a pop.

Banks' V-shape earnings recovery

There are reasons to feel optimistic about the banking recovery too. "Frozen loans" on CBA's balance sheet have plunged by 80% to $51 billion at the end of 2020. These loans are tied to borrowers who have experienced hardship during the pandemic and have paused repayments.

The big drop in troubled loans means the bank can lower its provisioning. Every dollar it removes from provisions flow straight to its bottom line.

Let's not forget that loan applications are up strongly. The value of new home loans approved in November hit a record high of $24 billion.

Excess cash for dividends and share buyback

The double tailwind could put CBA's CET1 ratio at around 12%. This is 1.5 percentage points above what the banking regulator requires banks to hold and the excess cash will be useful in lifting dividends or funding other forms of capital return.

But analysts are split on how likely capital returns might be this calendar year. The bank may not want to raise the ire of the banking regulators by lifting dividends and funding a share buyback when the economy hasn't fully recovered by COVID.

Foolish takeaway

CBA fortunes aren't unique. The Westpac Banking Corp (ASX: WBC) share price, Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price and National Australia Bank Ltd. (ASX: NAB) share price will benefit from these trends too.

CBA is the only big bank with a June financial year end. The others will report their results and dividends later as their financial year end is in September.

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Bank Shares

Woman with a concerned look on her face holding a credit card and smartphone.
Bank Shares

What price target does Macquarie have on ANZ shares following its result?

Is the broker bullish or bearish on this banking giant? Let's find out.

Read more »

A businesswoman on the phone is shocked as she looks at her watch, she's running out of time.
Dividend Investing

Hoping to bank the next dividend from NAB shares? Better hurry…

NAB shares will pay an interim dividend of 85 cents per share next month.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Bank Shares

What does Macquarie think NAB shares are worth after its result?

What do banking analysts think of NAB’s performance?

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Dividend Investing

Why is the Westpac share price falling for a fourth consecutive day?

The Westpac share price is down by more than 4% today.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
Dividend Investing

Here's everything you need to know about the latest ANZ dividend

ANZ just reported its half-year results and announced its interim dividend.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Bank Shares

Which is Macquarie's favourite big four bank right now?

Let's see which bank is this broker's top pick right now.

Read more »

Worried woman calculating domestic bills.
Earnings Results

ANZ share price falls on half-year results

How did the bank perform during the first half? Let's find out.

Read more »

Woman using a pen on a digital stock market chart in an office.
Bank Shares

Here's the Westpac dividend forecast through to 2027

Let's see what analysts are forecasting for the banking giant.

Read more »