NAB shares: A top tip for passive income?

Here's how much passive income NAB shares can give you…

| More on:
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

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

Key points

  • The ASX 200 big four banks are well-known dividend payers
  • That includes National Australia Bank
  • One broker tips NAB's dividends will grow into the future

When you ask an investor about buying ASX 200 shares for passive income from dividends, the big four banks probably come to mind. After all, ASX 200 bank shares, like National Australia Bank Ltd (ASX: NAB), have paid out some of the ASX's heaviest dividends for decades.

But are NAB shares really a top pick for passive income in 2023?

Well, let's start at the start.

So NAB shares have paid out two dividends over the past 12 months, as most ASX 200 dividend shares are wont to do. The first was the July interim dividend worth 73 cents per share. The second was the final dividend that investors received in December, worth 78 cents per share. Both dividends came fully franked, as is typical with NAB.

Both of these dividends were healthy increases over 2021's commensurate dividends. This total of $1.51 in dividends per share over the past 12 months gives NAB shares a trailing dividend yield of 4.7% (or 6.71% grossed-up with the full franking) today.

This yield represents $4.70 in passive income per year in dividends for every $100 invested.

Now, that's actually on the lower end of the scale when it comes to the other big four ASX banks.

For example, Westpac Banking Corp (ASX: WBC) shares offer investors a trailing dividend yield of 5.21% at current pricing. Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are sitting on a yield of 5.62% right now.

Only the Commonwealth Bank of Australia (ASX: CBA) share price has a lower dividend yield than NAB's today, at 3.47%.

Are NAB shares an ASX 200 buy for passive dividend income today?

So if NAB at least maintains 2022's dividends in 2023, investors can look forward to at least a 4.7% fully franked dividend yield this year. That's certainly a meaningful source of passive income from this ASX 200 dividend share.

But dividends are never guaranteed on the ASX. So there's no way to know if NAB will really keep its payouts steady this year.

But one ASX broker thinks the bank will.

As my Fool colleague James covered this morning, ASX broker Goldman Sachs has just come out with another buy rating on NAB shares. The broker has given the ASX 200 bank a 12-month share price target of $35.60. If realised, investors will enjoy an upside of more than 11% from capital growth alone from where the shares sit today:

Created with Highcharts 11.4.3National Australia Bank PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

But let's talk about dividends. So Goldman is also predicting that not only will NAB maintain 2022's dividend levels this year, but increase them. The broker is pencilling in a total of $1.66 in dividends per share for FY2023, which rises to $1.73 per share for FY2024.

So at least one ASX expert reckons NAB shares will be able to deliver rising passive income to investors for at least the next year or two. Only time will tell what kind of dividends NAB will end up funding in the future.

But at least one ASX broker is tipping NAB shares as a great source of passive dividend income going forward.

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank. 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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A couple sits on a sofa, each clutching their heads in horror and disbelief, while looking at a laptop screen.
Bank Shares

Why CBA shares could crash 40%+

Brokers are calling time on this banking giant's incredible run.

Read more »

Bank building with the word bank in gold.
Bank Shares

Guess which ASX 200 bank stock is down 4% after posting a quarterly profit decline

Let's see how this bank performed during the third quarter.

Read more »

Hologram of a man next to a human robot, symbolising artificial intelligence.
Bank Shares

How artificial intelligence could transform the banking industry

ANZ describes the move as “the single-biggest change program” the bank will undertake over the next few years.

Read more »

A man in a business shirt and tie takes a wide leap over a large steel trap with jagged teeth.
Bank Shares

5.75% yield: Are ANZ shares a dividend trap?

ANZ's dividend currently beats out its own term deposits.

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
Bank Shares

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

How much earnings could CBA generate in the coming years?

Read more »

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

CBA shares hit a new $176 record high. Too late to buy?

What can stop this bank now?

Read more »

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 »