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Date : 02/11/2023

Decoding Bank of Queensland’s (ASX: BOQ) 11% yield

The financial landscape is rife with swift changes, and for the shareholders of Bank of Queensland (ASX: BOQ), recent months have been tumultuous. Amidst fluctuating share prices and an unpredictable market landscape, the bank’s dividend yield has taken centre stage. The ASX 200 stock has seen significant fluctuations in its share price, sparking conversations among investors.

This article seeks to unpack the nuances of the Bank of Queensland’s financial journey, analyze its dividend trends, and offer a comprehensive insight into its foundational health, providing readers with a clear perspective on the bank’s standing in today’s financial landscape.

BOQ: FY23 Highlights

BOQ shares are trading at $5.57 apiece and have a market cap of 3.66 Billion AUD.

  1. Revenue: $1.96 Billion, increasing 3.55% YoY.
  2. Operating Expense: $1.06 Billion, increasing 10.86% YoY.
  3. Net Income: $124 Million, down 69.68% YoY.
  4. EPS: 0.60, down 15% YoY.
  5. Cash and Cash equivalents: $6.16 Billion, increasing 74.64%.

 Comparing BOQ with ASX 200

The Bank of Queensland is braving the storm differently in a market defined by rapid shifts. On one hand, the bank’s shares are managing to swim against the tide by recording a 0.18% rise to $5.56. This uptick contrasts the ASX 200’s decline of 0.96%, presenting a positive note for the bank’s shareholders. However, taking a longer view paints a different picture. Over the past three months, the bank’s shares have depreciated by 3.73%. This fall magnifies when viewed over six months, reaching 7.64%, and the year-to-date loss of 18.3% adds a layer of concern.

 The Silver Lining: BOQ Dividend Dynamics in Play

Yet, it’s not all gloom for the Bank of Queensland. As the share price has seen a downward trajectory, a notable consequence has emerged — the dividend yield. The current trailing dividend yield stands at a promising 7.94%. Factor in the bank’s consistent full franking credits, amplifying an even more impressive 11.34%. These numbers beckon the question: Is such a hefty yield genuine? The bank’s recent history suggests so. Over the preceding year, two dividends totalling 44 cents per share were announced. These dividends equate to the aforementioned grossed-up yield of 11.34% at the current share price.

Future prospects add another dimension to the discussion. With the Bank of Queensland shares set to trade ex-dividend soon, they’re prepping for the forthcoming final dividend of 21 cents per share. This represents a yield of 7.39% or a grossed-up figure of 10.56%.

Unpacking the BOQ Fundamentals

Beyond dividends, an astute investor will probe deeper, examining the core health of the bank. Recent disclosures by the Bank of Queensland revealed annual results for 2023, and they were far from rosy. A significant 70% dip in after-tax profits was observed, amounting to $124 million. This downturn was coupled with an 8% slide in cash earnings, concluding at $450 million. The bank’s net interest margin also noted a subtle yet concerning drop.

A company’s dividend potential is inherently tied to its core financial health. The declining profits and earnings of the Bank of Queensland culminated in the curtailed final dividend for 2023. This raises concerns about future dividends, especially if the bank fails to rejuvenate its growth trajectory. The current high dividend yield might be a double-edged sword — an enticing number shadowed by investor scepticism. With doubts about the bank’s ability to consistently offer yields above 10%, the future is watched with bated breath.

 Conclusion

Bank of Queensland stands at a crossroads, balancing its attractive dividend offerings and the need to fortify its core fundamentals. Investors, while hopeful, are advised to approach with caution, keeping a keen eye on the bank’s performance metrics. Only time will tell if the bank can sustain its enticing dividend yield or if adjustments are on the horizon.

 

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