The Commonwealth Bank of Australia (ASX: CBA) share price rose so high last year that some analysts now consider it the most expensive bank stock in the world.
While share price rises are beneficial for investors, they can lower dividend yields unless earnings grow.
And many analysts say the earnings outlook for all Australian banks is pretty flat this year.
Darren Thompson, Head of Asset Management at Equity Trustees Asset Management, says:
Bank earnings are anticipated to be broadly flat due to a combination of modest credit growth, ongoing competition restricting net interest margins, ongoing cost pressures and already cyclically low bad debt provisions.
Let's find out how much the bank stocks are expected to pay in dividends this year.
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How much will CBA shares pay in dividends this year?
The consensus expectation among analysts on the CommSec trading platform is that CBA shares will pay a dividend of $4.95 per share in 2025.
This is 6.45% higher than the $4.65 per share dividend that CBA paid to its shareholders last year.
This is the largest forecast dividend amount increase among the ASX 200 bank shares.
Other banks expected to pay increased dividends are ANZ Group Holdings Ltd (ASX: ANZ) (up 2.4%), National Australia Bank Ltd (ASX: NAB) (up 1.78%), and Macquarie Group Ltd (ASX: MQG) (up 1.56%).
The smaller regional banks are also expected to pay higher dividends in the new year.
The forecast dividend is 3.17% higher for Bendigo and Adelaide Bank Ltd (ASX: BEN). It is 2.94% higher for Bank of Queensland Ltd (ASX: BOQ).
However, given significant share price rises in 2024, these higher dividend amounts do not automatically translate to higher dividend yields.
What do much higher share prices mean for dividend yields?
ASX bank stocks had a phenomenal run of share price growth last year.
CBA shares shot the lights out with a 37.1% gain over the 12 months.
A higher share price will typically lead to a lower dividend yield unless a company increases its earnings enough to enable a significant boost to dividends.
However, Andrew Dale, portfolio manager and partner at ECP Asset Management, says the banks may face earnings pressure this year amid a sluggish Australian economy and high interest rates.
In an article on S&P Global Market Intelligence, Dale said:
If inflation continues to be an issue over the first half, the banks will continue to have earnings pressure because their costs of operating will continue to rise.
And you'll see further downward pressure on earnings.
And if you then start to see a rate cut, you get pressure on the net interest margin.
Jed Richards of Shaw and Partners also discussed CBA shares recently, telling The Bull:
Given high interest rates, increasing costs, a flat Australian economy and intensifying private debt competition, we believe the banking sector faces challenges in sustaining recent profits let alone generating growth.
The CBA's price/earnings ratio [P/E] is much higher than historical levels and is pricing in considerable growth.
In our view, this is highly unusual and unlikely given the economic environment.
CBA reported flat operating income of $27 billion and a 3% increase in operating costs to $12.2 billion in FY24. The net interest margin (NIM) fell eight basis points to 1.99%.
Overall, net profit after tax fell 2% to $9.8 billion, but this was better than analysts' expectations.
Forecast dividend yields for 2025
Here are the forecast dividend amounts and yields for the ASX banks based on their current share prices.
These forecasts have been published on the CommSec trading platform.
I've also included the dividend amounts for 2024 and the trailing yields based on current share prices.
| ASX bank share | 2024 dividend | Trailing yield | Forecast 2025 dividend | Yield |
| Commonwealth Bank of Australia (ASX: CBA) | $4.65 | 2.91% | $4.95 | 3.1% |
| National Australia Bank Ltd (ASX: NAB) | $1.69 | 4.24% | $1.72 | 4.32% |
| Westpac Banking Corp (ASX: WBC) | $1.66 | 4.97% | $1.55 | 4.64% |
| Macquarie Group Ltd (ASX: MQG) | $6.40 | 2.72% | $6.50 | 2.76% |
| ANZ Group Holdings Ltd (ASX: ANZ) | $1.66 | 5.44% | $1.70 | 5.57% |
| Bendigo and Adelaide Bank Ltd (ASX: BEN) | 63 cents | 4.67% | 65 cents | 4.81% |
| Bank of Queensland Ltd (ASX: BOQ) | 34 cents | 4.93% | 35 cents | 5.07% |
As you can see, the forecast CBA dividend yield is below the long-term average for the ASX 200 index, which is 4%.
ANZ shares are expected to pay the highest dividend yield in 2025.
If CBA shares go through a price correction, the yield will obviously improve.
Firetrail Investments expects the valuation multiple on CBA shares to fall sharply "at some point".
In its December shareholder letter, the fund manager said:
Our preferred metric is price-to-book versus return on equity (ROE). The higher the ROE, the more the market is willing to pay for an asset.
If CBA trades back to something more 'normal', given its fairly muted ROE outlook, you should expect a 30%+ retracement in the valuation at some point!
