Is the fully franked 6.2% yield on Bank of Queensland shares for real right now?

ASX bank shares are well-known for their fat dividends, which are usually fully franked. But looking at Bank of Queensland Ltd (ASX: BOQ) shares today, the yield from this bank stock still stands out.

As of yesterday’s closing price of $6.11, BoQ shares seemingly finished up trade on a sizeable dividend yield of 6.22%. Like most ASX banks, BoQ’s dividends usually come with full franking credits attached as well. That means this already-steep dividend yield grosses up to an impressive 8.89% with the value of those franking credits included.

A 6.22% yield is high, even by ASX bank standards. For some comparisons, only ANZ Group Holdings Ltd (ASX: ANZ) comes close to Bank of Queensland’s current yield. ANZ shares are currently trading on a yield of 5.96%, although that only comes partially franked.

Westpac Banking Corp (ASX: WBC) trades on a yield of 5.34% today, while National Australia Bank Ltd (ASX: NAB) is on 4.69%.

Shockingly, BoQ’s 6.22% yield is now almost double that of Commonwealth Bank of Australia (ASX: CBA) shares, which closed yesterday with a yield of 3.54%.

So let’s get down to the crux of today’s discussion: Is this 6.22% yield for real?

Do Bank of Queensland shares really trade on a 6.22% yield today?

Well, on one level, yes.

This yield is indeed ‘legit’, as it stems from BoQ’s last two dividend payments. The first of those was the final dividend from November, which was worth 21 cents per share. The most recent payment was May’s interim dividend of 17 cents per share.

That annual total of 36 cents gives BoQ shares a 6.22% yield at yesterday’s closing stock price of $6.11.

However, as any good dividend investor knows, a dividend yield represents the past, not the future. No ASX share, including BoQ, is under any kind of obligation to maintain its dividends at a previous year’s levels. So, there is no guarantee whatsoever that if you invested $1,000 in Bank of Queensland shares today, you will bank $62 in dividend income every year going forward.

Indeed, history is not on BoQ shares’ side here. That November final dividend of 21 cents per share was actually a reduction from the final dividend of 24 cents per share that investors enjoyed in 2022.

The 17-cent interim dividend from May was also another downgrade from the 20 cents investors banked back in 2023.

Looking forward, we have no idea what the next Bank of Queensland dividends will look like until the bank reveals them.

But some ASX experts aren’t holding their breath.

For example, last week, my Fool colleague Tristan covered the views of ASX broker UBS on BoQ shares. UBS is expecting BoQ’s cash earnings to drop from $450 million in FY23 to $294 million in FY24, eventually recovering to $406 million by FY28.

ASX shares fund their dividend payments by drawing on their earnings and profits, which doesn’t bode well for higher BoQ dividends in the future.

Only time will tell what the next Bank of Queensland dividends will be worth. But BoQ investors, as with all shares, shouldn’t be banking on that 6.22% yield to continue indefinitely.

The post Is the fully franked 6.2% yield on Bank of Queensland shares for real right now? appeared first on The Motley Fool Australia.

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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 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.