Commonwealth Bank of Australia (ASX: CBA) is one of the largest ASX dividend-paying shares. It has a market capitalisation of $179 billion, according to the ASX. But how big could the CBA dividend be in 2022 and 2023?
CBA is the largest of the big four ASX banks. CBA, Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC), and National Australia Bank Ltd (ASX: NAB) have been steadily growing their dividends after significant cuts during the COVID-19-hit year of 2020.
Australia's largest bank increased its latest interim dividend in its FY22 half-year result.
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Dividend growth in FY22?
CBA's board decided to grow the half-year dividend by 17% year on year to $1.75 per share. That represented a normalised cash payout ratio of around 70% which was in line with the board's interim target payout ratio normalised for long run loan loss rates.
The broker Ord Minnett expects CBA to pay an annual dividend per share of $3.80 in the FY22 full-year result.
If CBA were to pay that projected dividend, then that translates into a grossed-up dividend yield of 5.2% at the current CBA share price. It would also represent year-on-year growth of 8.6% compared to the annual dividend in FY21.
The major bank's latest profit update showed that it generated $2.4 billion of cash net profit after tax (NPAT) in the three months to 31 March 2022. This was down 2% year on year when comparing continuing operations.
FY23 expectations
CBA is expected to increase its dividend again in FY23.
Ord Minnett has pencilled in that CBA could pay an annual dividend of $4.05 per share in the 2023 financial year.
If CBA were to pay a dividend of that size, it would equate to a grossed-up dividend yield of 5.5%. That dividend payout would represent an increase of 6.6% compared to the projected dividend for FY22.
Is the CBA share price good value?
There are many brokers that seem to think that the CBA share price is a bit overpriced.
Ord Minnett currently has a hold rating on the business. However, the target price is $93 which suggests a decline of more than 10% over the next 12 months.
Citi rates the big bank as a sell, with a price target of $90.75. The broker thinks that CBA's margins could continue to be challenged in the near term as growth slows. However, Citi is expecting CBA to pay a grossed-up dividend yield of 6.25% in FY23.
Macquarie is another broker that has a negative rating on CBA, with a price target of $90. This broker also thinks that the profit margin could continue to be challenged.
One of the most positive brokers on the CBA share price is Credit Suisse, which is neutral on the bank with a price target of $102.80. It thinks that CBA will benefit from rising interest rates.
