Here’s how the NatWest dividend could earn me a £1,000 annual passive income!
Picture supply: NatWest Group plc
The previous few years have been good ones for shareholders in NatWest Group (LSE: NWG) (the identical can’t be mentioned of a number of the years earlier than that!). The shares are up 18% over 5 years however have soared 186% since September 2020.
The NatWest dividend yield is 5.5% even at in the present day’s worth. If I had invested in September 2020, I might now be incomes a 15.8% yield!
Investing in NatWest shares in the present day might doubtlessly assist me arrange sizeable passive revenue streams.
If I wished to focus on £1,000 per yr, right here is how I’d go about it.
Doing the maths
In the intervening time, the annual NatWest dividend per share is 17p.
So, to focus on £1,000 in passive revenue yearly, I would want to purchase 5,883 shares. On the present worth, that will set me again round £18,064.
Dividends are by no means assured
Nonetheless, simply shopping for the shares doesn’t imply I’ll essentially get the dividends.
I’d get fortunate and obtain a particular dividend (just like the 16.8p per share particular dividend paid for 2022). Then once more, I’d purchase the shares just for the dividend to be minimize or cancelled altogether, as the ultimate payout for 2019 and 2020 interim had been.
The overall annual NatWest dividend per share has actually moved a few good bit lately.
![](https://www.fool.co.uk/wp-content/uploads/2024/04/Natwest-total-annual-dividend-per-share-663x311.png)
So, how might I determine if that is the appropriate type of revenue share so as to add to my portfolio?
Solidly worthwhile
To pay dividends, a financial institution must generate cash. Typically we speak about earnings – and NatWest does properly on this regard. Lately, its earnings per share have been spectacular.
![](https://www.fool.co.uk/wp-content/uploads/2024/04/Natwest-EPS-1-663x311.png)
In its first quarter buying and selling assertion this week, the financial institution reported that complete earnings within the three-month interval fell 26% in comparison with the identical interval final yr. However they nonetheless got here in at £987m.
Taking a look at money flows
However whereas earnings are a helpful accounting measure, it’s money flows that in the end fund a dividend.
As an investor, although, free money flows for a financial institution can have restricted utility as an analytical software. Banks are within the enterprise of taking clients’ cash in and lending it out, so it may be exhausting to disentangle money flows within the bizarre course of their enterprise from their very own surplus capital era.
Nonetheless, the Natwest dividend has been comfortably lined by earnings lately, even together with the chunky particular dividend I discussed above.
![](https://www.fool.co.uk/wp-content/uploads/2024/04/Natwest-payout-ratio-663x314.png)
Constructing revenue streams
So would I purchase, if I wished so as to add £1,000 to my passive revenue streams?
One concern is the chance of a regulator-mandated dividend cancellation, as we noticed at NatWest and different UK banks in 2020. That strikes me as an even bigger danger within the closely regulated banking sector than in another components of the economic system.
My different concern is whether or not banks like NatWest will do properly in coming years.
A weak economic system might result in increased mortgage defaults, hurting income, surplus capital era, and due to this fact dividends. NatWest’s first quarter decline in earnings didn’t reassure me on this regard, so I cannot be investing for now.