Commonwealth Bank of Australia [ASX:CBA] shares are trading slightly lower today with the announcement of its full-year results.
The CBA share price stands at $74.58, at time of writing.
Despite taking a hit to its full-year profit, the bank said it would still pay out its final dividend, though it will be smaller than the previous corresponding dividend.
CBA’s full-year profit came in below analyst expectations.
CBA’s competitors are higher today as well.
Westpac Banking Corporation [ASX:WBC] jumped 2.25%. National Australia Bank Ltd [ASX:NAB] is up 2.24% and Australia and New Zealand Banking Group Ltd [ASX:ANZ] shares are trading 1.68% higher.
CBA’s surprise dividend
The release of CBA’s full-year results now gives us a better view of the damage caused by the coronavirus.
CBA’s full-year cash profit fell 11.3% to $7.3 billion.
The loss came on the back of ramped up provisions against loan losses.
Despite the loss, shareholders were treated to a dividend higher than the 92 cents analysts predicted.
The bank said it would pay final dividend of 98 cents, fully franked.
That brings the total dividend to $2.98 per share.
While the dividend is 31% lower compared to last year, it does reflect the strength of CBA’s balance sheet.
In fact, CBA is flirting with the maximum it can payout to shareholders.
Given the current economic instability, the Australian Prudential Regulation Authority (APRA) says banks should keep at least 50% of earnings.
CBA’s final dividend represents a payout ratio of 49.95% of its second-half statutory earnings.
That means that we could see a further reduction to the bank’s dividends if this crisis continues to drag on.
Though there is a new emerging class of Aussie dividend superstars.
Things could get worse before they get better
The better-than-expected dividend feat may not be repeated.
Loan impairments ballooned to $6.4 billion as the bank envisions further coronavirus-induced losses.
However, when it came to giving out breaks in loans, things appear to be on the up.
The amount of business and home loans deferrals were both down.
Home loan deferrals had dropped from 154,000 at peak to 135,000 as of 31 July.
Business loan deferrals were down from a peak of 86,000 to 59,000.
CBA CEO Matt Comyn said:
‘We anticipate that lower credit growth and low interest rates will continue to put pressure on our revenue, requiring a focus on performance, efficiency and capital allocation.’
With CBA saying that GDP is expected to fall by around 4% this calendar year, it might be some time for the bank’s dividends recover — if they ever recover completely.
If you’re interested in dividend stocks, then check out our top five ASX-listed dividend stocks with a great chance of maintaining big payouts during this mess. Click here to download your free report.
The Rum Rebellion