CBAJP recent quarterly distribution payment was $1.25. Rates are variable so can change with interest rates and sentiment. However, it's unlikely they will change a lot. 1.25*4 = $5 return on the current face value 102.25 = 4.9% yield. Thats not including grossing up the yield as they are fully franked payments. CBA's dividend yield is 2.9%. A full two percentage points lower despite equity being much riskier than debt.
So returns are significantly better on CBA's debt than its equity. No capital at risk buying the hybrids, however anyone buying the equity at these prices must know they are vulnerable to a sharp correction that could occur at any time. As the current CBA valuation is totally out of cycle & there is no precedent for it in history. No big bank in a major developed country had traded on such high normalized multiples.
What I also find really amusing. Is this week CBA has added 3.68%. Current market cap 266 billion. meaning CBA's market cap at the start of the week was 256 billion. CBA has added 10 billion in market cap in a week - 10 billion is how much profit it will do this year. The higher CBA goes, the greater the market cap will increase with every 1% gain - which will only dilute existing yields even quicker.
Its getting really serious now.
(20min delay)