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Commonwealth Bank of Australia's Dividend Analysis

Assessing the Sustainability of CMWAY's Upcoming Dividend

Commonwealth Bank of Australia (CMWAY) recently announced a dividend of $1.39 per share, payable on 2024-04-08, with the ex-dividend date set for 2024-02-23. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Commonwealth Bank of Australia's dividend performance and assess its sustainability.

What Does Commonwealth Bank of Australia Do?

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Commonwealth Bank is Australia's largest bank with operations spanning Australia, New Zealand, and Asia. Its core business is the provision of retail, business, and institutional banking services. The bank has emphasized its focus on banking in recent years with a number of asset divestments in wealth management and insurance.

Commonwealth Bank of Australia's Dividend Analysis
Commonwealth Bank of Australia's Dividend Analysis

A Glimpse at Commonwealth Bank of Australia's Dividend History

Commonwealth Bank of Australia has maintained a consistent dividend payment record since 2010. Dividends are currently distributed on a bi-annually basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.

Commonwealth Bank of Australia's Dividend Analysis
Commonwealth Bank of Australia's Dividend Analysis

Breaking Down Commonwealth Bank of Australia's Dividend Yield and Growth

As of today, Commonwealth Bank of Australia currently has a 12-month trailing dividend yield of 3.83% and a 12-month forward dividend yield of 3.64%. This suggests an expectation of decreased dividend payments over the next 12 months.

Over the past three years, Commonwealth Bank of Australia's annual dividend growth rate was -0.90%. Extended to a five-year horizon, this rate decreased to -3.10% per year. And over the past decade, Commonwealth Bank of Australia's annual dividends per share growth rate stands at -0.70%.

Based on Commonwealth Bank of Australia's dividend yield and five-year growth rate, the 5-year yield on cost of Commonwealth Bank of Australia stock as of today is approximately 3.27%.

The Sustainability Question: Payout Ratio and Profitability

To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Commonwealth Bank of Australia's dividend payout ratio is 0.75, which may suggest that the company's dividend may not be sustainable.

Commonwealth Bank of Australia's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Commonwealth Bank of Australia's profitability 4 out of 10 as of 2023-12-31, suggesting the dividend may not be sustainable. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.

Growth Metrics: The Future Outlook

To ensure the sustainability of dividends, a company must have robust growth metrics. Commonwealth Bank of Australia's growth rank of 4 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.

Revenue is the lifeblood of any company, and Commonwealth Bank of Australia's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Commonwealth Bank of Australia's revenue has increased by approximately 6.50% per year on average, a rate that underperforms approximately 51.28% of global competitors.

The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Commonwealth Bank of Australia's earnings increased by approximately 12.80% per year on average, a rate that underperforms approximately 41.74% of global competitors.

Lastly, the company's 5-year EBITDA growth rate of 4.10%, which underperforms approximately 65.86% of global competitors.

Next Steps

Given Commonwealth Bank of Australia's dividend payments, dividend growth rate, payout ratio, profitability, and growth metrics, investors should closely monitor these factors to determine the long-term sustainability of the dividends. While the bank's history of consistent dividend payments is commendable, the negative dividend growth rates and lower growth ranks raise questions about future dividend stability. Investors may want to consider these factors in the context of their overall investment strategy and risk tolerance. For those seeking high-dividend yield opportunities, GuruFocus Premium users can utilize the High Dividend Yield Screener to find stocks that meet their dividend criteria.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus.