Can income investors bank on a 6% dividend yield from NAB shares?

Investors seeking passive income have likely cast their eye over National Australia Bank Ltd (ASX: NAB) shares. The S&P/ASX 200 Index (ASX: XJO) big four bank currently offers a respectable 4.78% dividend yield.

However, some income investors might be looking for a bit more oomph.

Fortunately, one top broker has tipped NAB to grow its dividends by 21% in the coming years, potentially leaving the share offering a near-6% yield.

Let’s take a look at what the future could hold for the dividend-paying banking giant.

Could NAB shares soon boast a near-6% dividend yield?

The NAB share price has outperformed over the last 12 months, gaining 12% to trade at $31.60 compared to the ASX 200’s 4% rise.

And now, the bank could be a passive income winner, according to top broker Goldman Sachs.

The broker has a buy rating and a $35.60 price target on the stock – representing a potential 12.6% upside.

But that’s not the only improvement the broker is tipping. It also expects NAB to up its dividends over the coming years.

NAB paid out $1.51 per share of dividends in the financial year 2022. That was made up of a 73-cent interim offering and a 78-cent final payout.

The broker expects the bank’s dividends to rise to a total of $1.73 per share in financial year 2023.

It also forecasts ASX 200 banks’ net interest margins (NIMs) to begin plateauing this year as housing volumes trough and business volumes slow. However, it’s hopeful asset quality will remain strong.

Looking further ahead, Goldman Sachs tips NAB’s payouts to jump to $1.78 per share in the 2024 financial year and to a whopping $1.83 per share in FY2025.

At its current share price, $1.83 of dividends would see NAB shares boasting a near-6% dividend yield, coming in at 5.79%.

However, if both the broker’s price target and dividend expectations were to come to fruition in financial year 2025, the stock could be trading with a decent 5.14% yield.

The post Can income investors bank on a 6% dividend yield from NAB shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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.

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