next dividend, page-14

I'll be controversial and predict a cut to 82c.

Current payout ratio is 85% which most likely is not sustainable in the short to medium term. I can see the new CEO "placing" the bank on a more sustainable footing and "doing the right thing" by its customers. In other words, nab needs to free up funds to cover cet requirements (NZ has been more demanding than Australia in that regard), royal commission related payouts, election uncertainty re franking credits and property investment, and slow economic growth.

If the new CEO decides to "make their mark", the payout ratio could be cut significantly. ANZs payout ratio is around 60-65%, but hard to see a cut that drastic. That would be like raising the white flag to the markets.

A payout ratio of 75% on last years eps would result in a div of 87c. Assuming a reduction in profitability ( to say 220cps from 232cps) as well as the other things mentioned above, 75%pr would result in 82cps. That would save NAB about $950m pa in div payouts and provide a sizeable war chest to cover the contingencies above and at the same time removing a degree of uncertainty about future dividends. It would still equate to a div of 6.5%ff at the current price.

So, having put my crystal ball back in the drawer, I guess we'll find out in a week. If I have guessed too low, then I will be pleasantly surprised by my higher than expected dividend.