Dividends in the Australian Banking Sector

A composite image of signage of Australia's 'big four' banks ANZ, Westpac, the Commonwealth Bank (CBA) and the National Australia Bank (NAB) signage in Sydney, Friday, Oct. 23, 2015. (AAP Image/Joel Carrett) NO ARCHIVING

It’s very hard to talk about dividends in Australian market without talking about banks. The increase in dividend distributions over the past decade has been primarily driven by the banking sector. Australian listed companies have demonstrated immense strength in terms of dividend growth since the global financial crisis and banks have been key contributors to the hefty payments. Australia ranks amongst the top equity markets in the world that pay good dividends, and about 70 per cent of the dividend in Australia comes from the financial sector. The big 4 banks in Australia have thus been among the top dividend-payers, as seen consistently over the years. Given that dividends support the compounding of returns over time and form a major part of a portfolio return, the banking sector in Australia has been doing its bit to provide good returns to the investors.

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Dividend contribution of various sectors in past years (Source: ASX Reports)

For instance, National Australia Bank Limited (ASX: NAB), which provides financial services in Australia, New Zealand, Asia and in the United States; has an appealing yield of 6.88 per cent and the bank paid a final dividend of 99 cents (fully franked) for 2017, which was unchanged from the 2017 interim dividend and from last year’s dividend. There were fluctuations in the yield over the last ten years and the dividends per share have increased over the period, while noted to be steady over the last four years. It maintains its dividend pay-out ratio that is around 80 percent and had reported a dividend pay-out ratio of 80.8 per cent in 2016 and 79.4 per cent in 2017.


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