NAB shares: A top tip for passive income?

When you ask an investor about buying ASX 200 shares for passive income from dividends, the big four banks probably come to mind. After all, ASX 200 bank shares, like National Australia Bank Ltd (ASX: NAB), have paid out some of the ASX’s heaviest dividends for decades.

But are NAB shares really a top pick for passive income in 2023?

Well, let’s start at the start.

So NAB shares have paid out two dividends over the past 12 months, as most ASX 200 dividend shares are wont to do. The first was the July interim dividend worth 73 cents per share. The second was the final dividend that investors received in December, worth 78 cents per share. Both dividends came fully franked, as is typical with NAB.

Both of these dividends were healthy increases over 2021’s commensurate dividends. This total of $1.51 in dividends per share over the past 12 months gives NAB shares a trailing dividend yield of 4.7% (or 6.71% grossed-up with the full franking) today.

This yield represents $4.70 in passive income per year in dividends for every $100 invested.

Now, that’s actually on the lower end of the scale when it comes to the other big four ASX banks.

For example, Westpac Banking Corp (ASX: WBC) shares offer investors a trailing dividend yield of 5.21% at current pricing. Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are sitting on a yield of 5.62% right now.

Only the Commonwealth Bank of Australia (ASX: CBA) share price has a lower dividend yield than NAB’s today, at 3.47%.

Are NAB shares an ASX 200 buy for passive dividend income today?

So if NAB at least maintains 2022’s dividends in 2023, investors can look forward to at least a 4.7% fully franked dividend yield this year. That’s certainly a meaningful source of passive income from this ASX 200 dividend share.

But dividends are never guaranteed on the ASX. So there’s no way to know if NAB will really keep its payouts steady this year.

But one ASX broker thinks the bank will.

As my Fool colleague James covered this morning, ASX broker Goldman Sachs has just come out with another buy rating on NAB shares. The broker has given the ASX 200 bank a 12-month share price target of $35.60. If realised, investors will enjoy an upside of more than 11% from capital growth alone from where the shares sit today:

But let’s talk about dividends. So Goldman is also predicting that not only will NAB maintain 2022’s dividend levels this year, but increase them. The broker is pencilling in a total of $1.66 in dividends per share for FY2023, which rises to $1.73 per share for FY2024.

So at least one ASX expert reckons NAB shares will be able to deliver rising passive income to investors for at least the next year or two. Only time will tell what kind of dividends NAB will end up funding in the future.

But at least one ASX broker is tipping NAB shares as a great source of passive dividend income going forward.

The post NAB shares: A top tip for passive income? appeared first on The Motley Fool Australia.

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More reading

• How I’d invest $300 a month in ASX shares to target an extra income of $20,000 per year
• Buy NAB and this ASX 200 dividend share now: brokers
• 3 ASX dividend shares I’m backing to outperform in 2023
• Should I buy Westpac shares for the big dividend?
• ANZ share price slips amid $50m acquisition

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank. 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. 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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