Should I buy Bank of Queensland shares for passive income?


Share post:

Image source: Getty Images

It has been a stinker of a year for the Bank of Queensland Limited (ASX: BOQ) share price. In the space of 12 months, shares in the $4.5 billion Brisbane-based bank have fallen 17% in value — severely underperforming the S&P/ASX 200 Index (ASX: XJO).

However, shareholders were lucky enough to land more dividends in 2022 than the previous year. This begs the question: are Bank of Queensland shares worthwhile for passive income purposes?

Let’s delve into the details.

Is the dividend competitive with other banks?

When it comes to investing, we are all looking for the best place to deploy our cash. That’s why it would make sense to assess how the dividends from the Bank of Queensland stack up against the big four.

ASX-listed company Dividend yield Income from $5,000 invested
Bank of Queensland Limited (ASX: BOQ) 6.7% $335
Commonwealth Bank of Australia (ASX: CBA) 3.7% $185
Westpac Banking Corp (ASX: WBC) 5.3% $265
National Australia Bank Ltd (ASX: NAB) 5.0% $250
Australia and New Zealand Banking Group Ltd (ASX: ANZ) 6.2% $310

The table above shows that the Bank of Queensland can lay claim to the highest dividend yield of the bunch for now. Yet, the latest data shows that the Queensland bank holds the thinnest profit margin of those listed above.

At the end of FY22, the 148-year-old recorded a bottom-line margin of 25.5%. Meanwhile, the big four — except for Westpac — achieved a margin above 30% for the financial period. A deeper look into the financial statements would be needed to understand why.

Would I buy Bank of Queensland shares?

At a price-to-earnings (P/E) ratio of 10.7 times, this Aussie bank share looks considerably cheaper than CBA (read more here for my verdict on CBA shares).

Furthermore, the dividend yield on Bank of Queensland shares has historically hovered above 5%. That is certainly a respectable passive return. However, my concerns arise when considering total shareholder returns.

In the past five years, shareholders are down 27% even with the inclusion of dividends. Since the Bank of Queensland commenced trading on the ASX in 1999, the share price has climbed approximately 29%. That works out to be a compound annual growth rate (CAGR) of 1.1%.

Now, the next 20 years could be entirely different. However, being a bank outside of the big four is a tough business. It truly is a David and Goliath story if an outsider can outperform the big dogs of Aussie banking.

For that reason, I’d personally look for my passive income elsewhere.

Source link


Please enter your comment!
Please enter your name here

Related articles

$250 Main Event ($500,000 GTD) | 2023 888poker XL Winter Series

Players have been duking it out for a couple of weeks trying to earn Day 2 seats...

Universal Credit LATEST: Thousands could see benefits STOPPED under new rules – check if you’re affected

Parents can get their hands on FREE nappies with this new scheme With the cost of living continuing...

How I’d spend £9 a day on FTSE shares to target £1,000 in passive income

One of my favourite passive income ideas is buying blue-chip shares that can pay me dividends. That...

My top 2 stocks to buy in February

With January soon to end, I’ve been looking for stocks to buy in February. I’ve particularly...