Everything you need to know about the supersized CBA dividend

A person is weighed down by a huge stack of coins, they have received a big dividend payout.A person is weighed down by a huge stack of coins, they have received a big dividend payout.

If you own Commonwealth Bank of Australia (ASX: CBA) shares for their dividend, you’re in for a treat today.

Australia’s titan of the banking realm released its first-half results of FY23 earlier this morning. Alongside growing the bank’s net profits to $5,153 million (up 9% year on year), CBA decided to pass on the winnings with a bigger dividend.

In line with estimates, the latest CBA interim dividend is $2.10 per share.

Yet, it appears the market had been hoping for more. The CBA share price is trading 5% lower to $103.86 in the early moments of trade. This is a much more severe opening reaction than what is playing out on the S&P/ASX 200 Index (ASX: XJO) right now, which is down 0.5%.

CBA dividend is now even juicier

There is ample reason for investors in this ASX banking share to be chuffed this morning. The latest report was largely positive, but it is the passive income portion that is particularly exciting.

Today’s declared interim dividend of $2.10 per share is a monumental 20% upsize from the company’s payment a year ago. Notably, it also represents a 5% increase in the bank’s pre-COVID dividend.

Making it all possible is the Commonwealth Bank’s sturdy first-half profits in FY23. An improved net interest margin and growth across its core products allowed CBA to reel in more for the bottom line.

Furthermore, the interim dividend represents 69% of the bank’s cash earnings (or approximately 70% after normalising for loan loss rates) — matching up with its interim payout ratio target.

For those shareholders counting down the days to payment, there are some important dates to keep in mind. The 22nd of February will be when CBA shares trade ex-dividend — making 21 February the last chance for any new CBA investors to take the plunge and be entitled to the interim dividend.

The most important date of all — eligible shareholders will collect their CBA dividend on 30 March.

However, the good news doesn’t stop there. In addition to the increased payment, CBA’s management has decided to extend its on-market share buyback by a further $1 billion.

Taking a closer look at the CBA share price

Today’s weakening CBA share price has put a dent in the bank’s performance so far this year.

Prior to this morning, shares in Australia’s largest bank were up 8.1% year-to-date. However, after the negative reaction to its latest earnings, shares are now only up 2.7% in 2023.

Factoring in the latest CBA dividend and the reduced share price, the company now offers a dividend yield of roughly 4%.

The post Everything you need to know about the supersized CBA dividend appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has positions in Commonwealth Bank Of Australia. 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.

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