NAB share price: Here's why the dividend yield just rocketed 24%

There's an upside to this falling bank stock.

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The National Australia Bank Ltd (ASX: NAB) share price has been in the forefront of the ASX news cycle for the past few weeks. And not in a good way.

NAB, like most ASX 200 bank stocks, is taking the brunt of the market sell-off that we've seen take hold over the past month or so. 

It was only back in mid-February that NAB shares were hitting new multi-year highs of over $41, levels investors haven't seen for this bank since the pre-global financial crisis glory days of 2007.

Today, those same NAB shares are going for just $33.66 at the time of writing, down a horrid 1.2%. Since that mid-February high, the NAB share price has now lost a painful 18.5% or so. What a difference just a few weeks can make.

Check it out for yourself below:

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

Of course, this crash in the NAB share price that we've witnessed since mid-February has little to do with the bank itself. Sure, NAB did release a poorly received quarterly update on 19 February, which caused a small sell-off for the NAB share price at the time. 

However, given all four of the major banks have been dropping like rocks for the past few weeks, we arguably can't put all of NAB's woes on that report. 

The more likely culprit is the global market sell-off that seems to have been triggered by the Trump Administration's trade policies.

The sharp correction in the NAB share price that we've witnessed since February has no doubt been painful for existing shareholders. But it does have a silver lining: the dividend yield

NAB share price: Dividend yield rises 24%

As most income investors would be aware, a share's dividend yield is the function of two underlying metrics. The first is the raw dividends per share that a company pays out. The second, the said company's share price.

If a company's share price rises, the dividend yield will drop, assuming its underlying dividend per share stays the same, of course. But the opposite is also true.

Let's see how this plays out in real life.

Over 2024, NAB paid its shareholders two fully franked dividend payments. The first was the July interim dividend, worth 84 cents per share. The second was the December final dividend, worth 85 cents per share. That's an annual total of $1.69 per share.

When NAB was trading at $41.68 a share last month, these dividends would have combined to give the bank a trailing dividend yield of 4.05%. But today, at the present price of $33.72, NAB's dividend yield has risen to 5.01%. That's an improvement worth 23.7%.

Of course, one has to buy NAB shares at the current pricing if one wishes to take advantage of this higher yield. But the opportunity is currently presenting itself.

That's a big difference for investors who buy shares just to obtain dividend income. It just goes to show that there is a silver lining in many investing clouds. 

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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 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 Scott Phillips.

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