Is the NAB (ASX:NAB) share price a buy for the 7% dividend yield?

Could the NAB share price be a solid buy for dividends in 2022?

| More on:
fingers walking up piles of coins towards bag of cash signifying asx dividend shares

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

After recently reporting its quarterly update, is the National Australia Bank Ltd. (ASX: NAB) share price a buy for the projected grossed-up dividend yield of 7% in 2022?

NAB is one of the big four ASX banks along with Commonwealth Bank of Australia (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Westpac Banking Corp (ASX: WBC).

Based on the dividend estimate on CommSec, the big four bank is expected to pay an annual dividend of $1.42 in FY22, which translates into the projected yield of 7%.

But there's more to considering a business, even an ASX bank, than just the dividend. Other factors including the attractiveness of the valuation, the growth momentum and business plans should be taken into account.

Share prices are constantly moving, but investors get a real insight into a business when it releases a quarterly or half-yearly result.

NAB recently released its performance for the three months to 31 December 2021.

FY22 first quarter performance

The big four ASX bank said that it made $1.8 billion of statutory net profit, with $1.8 billion of cash earnings. Almost $2 billion of net profit in three months would be a significant number for most Aussie businesses. But how much growth did that represent?

NAB said that its cash earnings grew by 9.1% compared to the prior corresponding period. Before tax and credit impairment charges, the cash earnings rose 6%. Compared to the FY21 second half quarterly average, cash earnings rose 12%. Earnings growth can be a key driver of the NAB share price over time.

A key part of the profit growth was that revenue increased 8%, reflecting higher volumes across housing and business lending, increased fees and commissions and a recovery in markets & treasury income.

NAB's net interest margin (NIM) declined by 5 basis points to 1.64%, which included competitive pressures and a negative impact from the housing lending mix.

One of the things that the bank was pleased to tell investors about was its net promoter score (NPS) – a measure of customer satisfaction – which continued to improve and was up to +1 in the latest quarter, ranking it first of the big four ASX banks. The business NPS was 0, ranking it second of the major banks.

NAB said that its credit impairment charge was a write-back of $35 million, reflecting the impact of higher house prices and improving asset quality across both housing and business lending with continued low specific charges. The ratio of loans being more than 90 days past due continued to decline.

Is the NAB share price a buy?

There is a mixture of views on NAB at the moment. Some brokers think it's a buy, like Macquarie and UBS. However, others, like Morgans and Citi, currently have a 'hold' rating on the bank.

Citi thinks that the NAB performance is improving and it will be able to achieve stronger profitability in the coming periods, but the price target is just $30.50. Morgans is wary about the potential of a future penalty from AUSTRAC.

Macquarie thinks that NAB is growing its lending volumes nicely and winning market position. That's why it has raised its price target to $32.50. The UBS price target is only $30.50, but noted that NAB did better than the broker was expecting in this quarter.

Should you invest $1,000 in Dicker Data right now?

Before you buy Dicker Data 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 Dicker Data 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

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. 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

man thinking about whether to invest in bitcoin
Bank Shares

Is this the right time to invest in Westpac shares after the interest rate cut?

Should investors bank on rate cuts helping Westpac?

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

How did ASX bank shares react to the RBA decision?

The Reserve Bank of Australia just reduced interest rates by 0.25% in the second cut for 2025.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Dividend Investing

Dividends from ASX 200 bank shares 'looking very stretched': expert

The banks have always been a favourite choice among ASX dividend investors. But the outlook ain't great.

Read more »

A pink piggybank sits in a pile of autumn leaves.
Bank Shares

How much higher can the CBA share price rise?

One fund manager has given their view on the biggest bank.

Read more »

A young man goes over his finances and investment portfolio at home.
Bank Shares

Why is the Macquarie share price sinking today?

Let's see what is causing its shares to start the week in the red.

Read more »

Woman with spyglass looking toward ocean at sunset.
Bank Shares

Here's the earnings forecast out to 2029 for NAB shares

Let’s look at what experts are predicting for the bank.

Read more »

A man in a suit looks serious while discussing business dealings with a couple as they sit around a computer at a desk in a bank home lending scenario.
Bank Shares

Here's what Westpac says the RBA will do with interest rates next week

The RBA is meeting on Tuesday. Will it cut rates? Let's find out.

Read more »

A woman wearing yellow smiles and drinks coffee while on laptop.
Bank Shares

CBA shares top $170. Where to now?

Another day, another record high for CBA shares.

Read more »