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Commonwealth Bank of Australia (ASX:CBA) shares have been performing well in the current market rally. At the time of writing, CBA shares are trading at $98.44 apiece, and they have seen a 1.6% increase, outpacing the ASX 200's 1.3% gains. For investors who are looking for a 5% dividend yield from CBA shares, there are a couple of considerations to keep in mind. It's important to note that CBA shares are among the ASX financial stocks that are attracting attention in the current market conditions.
CBA's Dividend Yield
While CBA shares currently offer a dividend yield of less than 5%, they remain attractive to passive income investors for several reasons. CBA pays fully franked dividends, which can provide tax benefits to investors when they report their earnings to the Australian Taxation Office (ATO). Additionally, ASX CBA has a history of paying two dividends annually, even during challenging market conditions, such as in 2020 during the COVID-19 pandemic.
In the most recent dividend distribution, eligible investors received a final dividend of $2.40 per share on September 28. This marked a 14% increase from the previous year's final dividend, driven by a 13% year-on-year growth in the company's operating income, which reached $27.24 billion in FY 2023. CBA's cash net profit after tax also increased by 6% from FY 2022 to $10.16 billion.
Including the $2.10 per share interim payout, CBA shares have provided a total of $4.50 per share in fully franked dividends over the past 12 months, resulting in a trailing yield of 4.6% based on the current share price.
Waiting for a 5% Yield
To achieve a 5% dividend yield from CBA shares, the share price would need to decrease to $90. This represents an 8.5% decline from the current price. However, buying CBA shares at $90 could lock in higher potential yields for investors.
For example, UBS projected that CommBank would deliver $4.76 per share in dividends for the full 2024 financial year. If CBA shares were purchased at $90 per share, investors would earn a yield of 5.3% if UBS's forecast proves accurate.
Is It a Good Idea to Buy CBA Shares with a 5% Dividend Yield?
Ultimately, the decision to purchase CBA shares when the dividend yield reaches 5% depends on individual investor needs and preferences. However, buying CBA shares at $90 per share appears to be a solid entry point for many investors, considering the potential for higher yields and the bank's strong performance.
It's important to conduct thorough research and consider your own financial goals and risk tolerance before making any investment decisions
