National Australia Bank Ltd (ASX: NAB) shares are a popular option for income investors.
That’s because the banking giant is traditionally one of the larger dividend payers on the Australian share market.
For example, in FY 2022, the bank rewarded its shareholders with a $1.51 per share fully franked dividend.
Based on the current NAB share price of $27.86, this equates to a 5.4% dividend yield, which is well ahead of the market average.
Will NAB shares continue to offer big yields?
A big dividend yield is great but only if it is sustainable or capable of growing in the future. If not, it could end up being nothing but a yield trap.
The good news is that analysts at Goldman Sachs are confident that this is not the case with NAB shares. In fact, the broker believes the NAB dividend can increase in FY 2023 and then be maintained at that level through to FY 2025.
According to a recent note, the broker has pencilled in a 10% increase in the bank’s dividend to $1.66 per share in FY 2023. This represents an even more attractive fully franked 6% dividend yield for investors buying at today’s price.
They can then look forward to receiving the same $1.66 per share dividends in both FY 2024 and FY 2025.
Is it a buy?
Goldman continues to see value in NAB shares at the current level. It has a buy rating and a $30.69 price target on them.
This implies a potential upside of just over 10% for investors over the next 12 months. And if you include dividends, the total return increases beyond 16%.
All in all, this could make it worth a look if you are searching for income or banking sector options right now.
