WBC price target $41, page-517

What if scenario analysis for WBC dividend.

Worst case scenario - Last year interim dividend was 94 cents and WBC decides to skip interim dividend for FY20. This will result in cash saving of circa $3.4 billion. The share price will go down when the news comes out as small investors will try to sell in panic. Share price will go back up shortly because this news will be discounted by the large institutions as they understand the consequences of this action. WBC balance sheet will become even more stronger if they skip the interim dividend. The franking credit balance of circa $1.45 billion under utilised due to non-payment of dividend will eventually get utlilised in the future.

Scenario 2 - WBC decides to reduce the interim dividend for FY20 from 94 cents to lets say around 60 cents. This will result in cash outflow of roughly $2.2 billion instead of $3.4 billion so cash position will improve by $1.2 billion and this will be sufficient enough to cover the AUSTRAC fine amount as well as meet APRA's Tier 1 capital requirements. WBC won't need to raise any additional capital and this is good news.

Buying WBC shares is like planting a sapling. You need to nurture the plant and watch it grow until it grows and becomes a strong tree. Once it becomes a tree then it will start bearing fruits for a lifetime. Buy WBC now and sell half of WBC your shares when the price doubles in next few years. This method will result in zero capital at risk. You hold on to the remaining shares which will yield dividends and you re-invest those dividends into WBC and in 20 years time you will have a large number of WBC shares at zero capital cost.

Large portion of WBC dividend gets re-invested back into WBC shares through their Dividend Reinvestment Plan which leads to more capital which means stronger balance sheet. WBC is a true blue chip. You cannot go wrong if you buy and hold WBC shares for the long term.