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A special dividend from CBA?

Nicholas Grove  |  15 Jul 2013Text size  Decrease  Increase  |  

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Nicholas Grove is a Morningstar journalist.


Commonwealth Bank of Australia (CBA) is set to release its earnings results for fiscal 2013 in mid-August, being the only bank among Australia's "big four" with a financial year to the end of June.

Several analysts are expecting the bank to post a record set of full-year profit figures, and many have raised their dividend forecasts ahead of the announcement.

Deutsche Bank recently raised its dividend forecast for the second half of the 2013 financial year by 15 cents to $2 a share. This would take CBA's full-year dividend to $3.64, up from the previous year's payment of $3.34.

Goldman Sachs expects CBA to pay a second-half dividend of $2.12 a share, which would take the full-year dividend to $3.76.

Morningstar head of financial services Asia Pacific, David Ellis, is forecasting a final dividend from CBA of $2.01 a share. On top of the bank's most recent interim dividend of $1.64 a share, his full-year forecast comes to $3.65 a share.

One thing Ellis says he will be looking at in CBA's upcoming results is the bank's organic capital generation. This will help him decide what sort of a dividend is likely at the next result - and whether there is likely to be the payment of a special dividend at this result.

For this upcoming result, Ellis says one of his fellow analysts is expecting CBA to increase its dividend payout ratio from 75 per cent to 80 per cent, which would result in a second-half payment of $2.20 a share.

While it's possible the dividend that CBA actually pays at this result will be higher than his $2 forecast, Ellis believes this payment would more likely take the shape of a special dividend, as opposed to an increase in the payout ratio.

"It's either going to be a special dividend or a higher payout ratio," he says. "If their current run-rate of capital generation is strong, then it will give the CBA board more confidence to announce either a higher payout ratio or a special dividend."
Overall, Ellis expects CBA to post a full-year cash profit - which is a preferred measure of underlying earnings among the big four banks - of about $7.6 billion for fiscal 2013.

He expects the result to be largely driven by CBA's Retail Banking operations - its biggest division - and to a lesser extent its Business Banking and Institutional Banking divisions.

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