Will Westpac shares really pay a 9.6% dividend yield next year?

Happy man holding Australian dollar notes, representing dividends.

Happy man holding Australian dollar notes, representing dividends.

After a positive start to the trading week this morning, the Westpac Banking Corp (ASX: WBC) share price slumped in afternoon trading, closing the day even. Westpac shares finished at $19.19 each, the same as Friday’s closing price. That’s slightly better than the S&P/ASX 200 Index (ASX: XJO) though, which closed 0.64% lower today.

But even so, investors might be a little disappointed with how things have gone for this ASX 200 bank share today, particularly as Westpac was in green territory this morning, rising as high as $19.44 a share. But, as we discussed last week, falling share prices give investors a silver lining in rising dividend yields. And Westpac’s current dividend yield of 6.32% is certainly enough to draw attention.

Westpac’s dividends come fully franked too, which is pretty typical for ASX 200 bank shares. If we include the value of these full franking credits, this dividend yield grosses up to 9.03%.

But that is a trailing dividend yield, based on the payouts Westpac has doled out over the past 12 months. So what does the future hold for Westpac’s dividend?

Will Westpac shares pay a 9.6% dividend next year?

Well, as my Fool colleague James covered last week, investment bank and ASX broker Goldman Sachs reckons there is a lot of good news in store for dividend investors when it comes to Westpac shares. Goldman is expecting the bank to continue to increase its dividend per share all the way to FY2024.

Over FY2021, Westpac paid out $1.18 in dividends per share. For FY2022, the bank has already paid a 61 cents per share interim dividend, which was a healthy increase on FY2021’s interim payment of 58 cents per share. Goldman is expecting Westpac’s final dividend for FY2022 to come in at 62 cents per share.

But, going forward, the broker is expecting Westpac to fund a total of $1.29 in dividends per share over FY2023. FY2024 will also see an increase, this time to $1.46 per share.

So if Westpac pays $1.29 in dividends per share in FY2023, what would it mean for investors?

Well, on Westpac’s current share price of $19.19, an annual dividend total of $1.29 would equate to a forward dividend yield of 6.3%. If we factor in those full franking credits, that would gross up to an eye-catching 9.61%.

It gets even better for FY2024, assuming Goldman is accurate with its predictions. If Westpac does indeed pay out $1.43 in dividends per share over FY202, investors would be looking at a forward yield of 7.62% (or 10.89% grossed-up).

Of course, none of this is guaranteed and is just one opinion. But if Westpac does end up following the dividend trajectory Goldman has laid out, it could mean a healthy stream of dividend income for investors over the next few years.

The post Will Westpac shares really pay a 9.6% dividend yield next year? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen 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 recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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