During the past 10 years, WBC has paid Net Dividend of $17.50...

During the past 10 years, WBC has paid Net Dividend of $17.50 per share. After adding Franking Credit of $7.50 per share, it worked out to Gross Dividend of $25 per share.

Dividend was $1.37 at it's lowest in FY2010 due to GFC. Dividend increased to $1.92 in FY2013 driven by the recovery after the GFC. From 2014, Dividends were kept stable in $1.80 range because Australian Banks were asked to increase their Tier 1 capital gradually over the next few years. As a result of the strong Tier 1 capital requirements, our big four Australian Banks rank in top 25% banks of the world now. The balance sheet of our big four Banks is now heaps stronger than it was during the GFC.

My base case assumption of Net Dividend per share is $1.60 for FY 2020. This is the low point in the cycle in banking and Dividends will increase over time like they did after the GFC. My expected Net Dividend range is $17.50 to $20 per share over the next 10 years. It works out to $25 to $28.50 per share after adding franking credits.

Let us say you buy 100 Westpac shares at $18 and your expected Gross Dividend is $25 to $28.50 per share over the next 10 years. The simple
annualised yield works out to 13.9% to 15.8%. If you reinvest Dividends into Westpac shares, the annualised compound yield works out to 32.2% to 37.5%. This does not take into account the capital growth over the next 10 years.

Used Warren Buffett's purchase of Capital Cities from 1979 and his purchase of Coca Cola from 1988 and plotted my Westpac investment thesis in his investing model. The answer is that you are investing in Westpac equity shares but in reality it is a very high yielding bond with high capital growth potential.

Albert Einstein said "Compound Interest is the 8th wonder of the world. He who understands it, earns it. He who doesn't, pays it."

Some of us might not be aware of the fact that WBC is the listed on ASX as well as NZX. WBC is the largest company on NZX. NZ is 2 hours ahead of us and NZX opened at 8am AEDST and Westpac is trading at NZ$19 now.