Everything you need to know about the supersized Westpac dividend
A person is weighed down by a huge stack of coins, they have received a big dividend payout.
The interim Westpac Banking Corp (ASX: WBC) dividend was just announced.
The S&P/ASX 200 Index (ASX: XJO) bank stock reported its half-year results for the six months ending 31 March this morning.
And despite slumping profits, management pleased passive income investors with a sizeable increase in the interim Westpac dividend payout.
This sees the Westpac share price up 2.4% at the time of writing on Monday, with shares trading for $27.05 apiece.
Here’s what you need to know.
The supersized Westpac dividend
Amid stiff competition in the banking sector, Westpac reported a 4% year on year decline in net operating income to $10.59 billion.
The ASX 200 bank’s net profit declined 16% to $3.34 billion.
But that didn’t stop management from declaring a fully franked interim dividend of 75 cents per share as well as a 15 cents per share special dividend, also fully franked.
This brings the interim Westpac dividend to 90 cents per share.
That’s up a whopping 28.6% from the 70 cents per share paid out a year ago.
The payout ratio works out to 74%, which is at the upper end of the bank’s sustainable payout ratio range of 65% to 75%.
And at the current Westpac share price, it equates to an instant yield of 3.3% from the interim dividend alone.
If you’d like to grab this passive income payout, you’ll need to own shares by market close this Wednesday, 8 May. Westpac shares trade ex-dividend on Thursday.
Eligible investors can then expect to see that income hit their bank accounts on 25 June.
Unless, of course, you prefer to reinvest those dividends and put them to work via the magic of compounding.
In that case, Westpac’s Dividend Reinvestment Plan (DRP) applies. Management expects to purchase shares on market to satisfy the DRP.
Adding in the 72 cents per share final dividend the bank paid out on 19 December, the big four bank trades on a fully franked yield (partly trailing, partly pending) of 6.0%.
What did management say?
Commenting on the boosted Westpac dividend, CEO Peter King said:
Westpac’s balance sheet is in good shape and with the momentum in our business, supports a special dividend of 15 cents per share fully franked and an increase in the buyback program of $1 billion to $2.5 billion.
The interim dividend is 75 cents per share fully franked, up 5 cents per share or 7% on the 2023 interim dividend. Overall, I’m positive about the outlook and confident we will continue to deliver for customers.
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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.