Should I buy CBA shares for 2023 dividend potential?

Commonwealth Bank of Australia (ASX: CBA) shares are up 7.8% in 2023.

Atop the potential for share price growth, the S&P/ASX 200 Index (ASX: XJO) bank stock is also popular among income investors.

CBA shares pay a trailing dividend yield of 3.5%, fully franked.

Of course, that figure is a trailing yield, backward-looking by definition.

The question now is, what kind of dividend potential do CBA shares have in the 2023 calendar year?

What’s the dividend outlook for the big four bank?

For CBA shares to offer similar or larger dividend yields in 2023, the bank needs to keep generating strong profits.

Over the past eight months, CommBank has been the beneficiary of higher interest rates. Higher rates generally enable banks to increase their net interest margins.

So long as the RBA doesn’t hike too aggressively over the coming months, potentially sending the economy into recession and driving a surge in bad debts, the big bank should continue to perform well.

Indeed, some top analysts, including those at Morgan Stanley, believe dividends from the bank are likely to leap higher in 2023.

Morgan Stanley forecasts CBA shares will deliver a 17% year-on-year increase in dividends, from $3.85 per share to $4.50 per share. That’s the biggest dividend growth Morgan Stanley forecasts for any of the big four banks.

At the current share price, that works out to a forecast, fully franked yield of 4.1%.

Also sounding off with a bullish outlook for dividends on CBA is passive income-focused Don Hamson, managing director at Plato Investment Management.

“There will be challenges for the big banks if more Australians start struggling with rising mortgage repayments. But they came out of the COVID period in great shape, have strong balance sheets and improving profit margins due to those rising rates,” he told The Motley Fool.

CBA stock is in the fund’s top ten holdings right now, Hamson said.

And history is certainly on CommBank’s side.

CBA shares have each yielded a total of $18.95 in passive income since early 2018.

How have CBA shares been performing longer-term?

As you can see in the below chart, CBA shares are up an impressive 17% over the past 12 months. And those gains don’t include the dividend payouts.

The post Should I buy CBA shares for 2023 dividend potential? appeared first on The Motley Fool Australia.

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More reading

• ASX 200: Buy high and sell higher
• Own CBA shares? Here’s the bank’s half-year results preview
• NAB shares: A top tip for passive income?
• If you stocked up on $5,000 of CBA shares 5 years ago, here’s how much dividend income you’ve made
• 3 of the safest ASX 200 dividend stocks in Australia

Motley Fool contributor Bernd Struben 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 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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