NAB Dividend Report

The entire banking sector offers extremely lucrative dividend yields. It’s easy to see why bank stocks are a favorite amongst yield investors. This article will report in detail, the NAB Dividend.

Over the past decade, NAB shareholders have enjoyed on average 8.94% per year from the dividend.

NAB Dividend Summary

NAB Dividend Dates 2021

NAB Dividend History Graph

The Banking sector has been one of the favorites for investors over the years due to its decent returns and solid dividend history. It’s no surprise why the sector makes up around 30% of the entire market index. Over the past decade, big banking stocks have managed to maintain a steady flow of income for investors, with an exception of the COVID dip.

NAB typically announces a dividend with the release of its half-year results in May and full-year results in November as seen in their financial calendar. NAB Dividends are typically paid twice a year, in July (interim dividend) and December (final dividend).

NAB has paid biannual dividends every year since 1982. Including the COVID-19 recessionary period. Most dividends have been fully franked. They also offer a Dividend Reinvestment Plan (DRP). We did see them reduce franking to 80-90% from 2005 to 2006.

NAB Dividend Yield Comparison

NAB’s current gross dividend yield is around 4.64%. This is in line with the other four big banks (CBA, WBC, ANZ).

The current NAB yield of 4.64% far exceeds the Average Term Deposit rate of 0.4%

Net NAB Dividend Yields Over Time

We can see NAB’s net dividend yield has averaged a rate of around 7%. From this, we can see NAB’s current net yield of 3.25% is below its historic average.

We can see the yield spike in 2020 due to a significant share price reduction. This yield tapered off as the share price increased, but earnings were still impacted. We are expecting earnings to return in 2021.

NAB Dividend Payout Ratio and Policy

A companies dividend payout ratio is the ratio of the total dividend sum paid out relative to the net income of the company. It is the percentage of earnings paid to shareholders in dividends.

Based on current averages NAB’s payout ratio is 57%, which we expect to increase in the coming years to a ratio of 72%.

So far in 2021, we have seen NAB payout its interim dividend of 60 cents.

In last year’s FY20 results NAB paid out 60 cents per share to investors. This comprised an interim dividend of $0.3 and a final dividend payment of $0.3 which was fully franked.

We note in this report NAB announced a payout ratio of 48%, in line with AHPRAs guidelines. These guidelines are based upon maintaining liquidity in the current recessionary period.

“Banks should seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer”

APRA has indicated that for the remainder of the calendar year boards should: 

• seek to retain at least half of their earnings when making decisions on capital distributions (and utilise dividend reinvestment plans and other initiatives to offset the diminution in capital from capital distributions where possible)

With APRA and RBNZ easing bank dividend restrictions, payout ratios are again increasing

The amount that is not paid to shareholders is retained by the company to pay off debt or to reinvest in core operations. It is sometimes simply referred to as the ‘payout ratio.’

NAB Share Price

NAB Dividend Policy

Future Payout Ratio: 65-75%

NAB has no recorded Dividend Policy. From past results, the group seems to target a payout ratio of 70-80%, which is common amongst the banks. They also appear to target fully-franked dividends.

“Future dividends to be guided by a payout ratio range of 65-75% of cash earnings, subject to Board determination based on circumstances at the relevant time”

NAB HY21 Results

With the commencement of the 2021 calendar year, AHPRA’s 50% payout guideline is no longer current, as such, we will expect NAB to return to a more normalized payout ratio.

When will my NAB Dividends be Paid?

The Bank typically announces a dividend with the release of its half-year results in May and full-year results in November.  Dividends are typically paid twice a year, in July (interim dividend) and December (final dividend).  Payment dates are listed on the financial calendar. 

NAB Dividend Reinvestment Plan (DRIP)

A DRIP or dividend reinvestment plan allows investors to automatically reinvest their dividends for additional shares in the company. Using this method, the investor will still receive the franking credit and will still be taxed on the cash value of their dividend. 

The simplest way to elect to participate in a company’s DRIP is through the related share registry (i.e. Computershare or Link Market Services).

• In Computershare it’s as simple as going ‘my profile’- ‘Reinvestment plans’ and selecting the company and electing to participate in full or partially. That is either the entire amount or a partial amount of your dividend is reinvested.
• On Link you simply click view details of the company of interest and update it in the ‘payments and tax’ section.

For more information check out our ASX DRIP VS NON-DRIP Guide

The Return of Dividends

Following the loss of earnings, we saw companies cut dividends across the board, leading to a massive reduction in the average dividend yield across the market. Now averaging below 4%. We saw the 4 big banks, which are known as massive dividend stocks, cut their yield by around 50% in 2020.

We saw the big four banks, cut dividends by around 50% in 2020

Following the return of earnings, we are expecting to see dividends returning to very attractive yields. Though we can’t expect past payout ratios, as many companies will elect to hold a large amount of cash on hand to strengthen their balance sheet against future uncertainties.

In 2021 we are expecting to see the big banks return more than $30 Billion to shareholders.

Across the market, we are expecting to see payout ratios increase by more than 10%. Which will have a big impact on the average yield rate. We are expecting to see the big banks return more than $30 Billion to shareholders.

NAB Share Buy-Back

In July NAB announced an on-market buy-back of up to $2.5 billion of ordinary shares.

NAB’s strong financial performance, combined with the divestment of MLC Wealth, has created an opportunity for NAB to reduce our surplus capital while retaining a strong balance sheet during these uncertain times.

Capital impact

NAB continues to operate well above APRA’s Unquestionably Strong benchmark of 10.50%, with a reported CET1 capital ratio of 12.37% at Level 2 and 12.40% at Level 1 as at 31 March 2021.

The $2.5 billion on-market buy-back will reduce the CET1 capital ratio at Level 2 by around 60 basis points.

What is a Buy-Back?

A share repurchase is where a company will buy back its shares from investors. This can be completed one of two ways; via an on-market buyback or off-market buyback.

In the on-market method, the company will directly go to the market and repurchase their shares from those selling, as any regular investor would.

The company will then either cancel the shares or hold them, so as they are not publicly traded. The EPS of the company will be artificially raised as the formula earnings/shares have been altered whereas the number of shares PE may temporarily decrease due to an increase in EPS. Learn more about Share Buy-Backs Here.

NAB Dividend History

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