Lloyds Banking Group PLC and NatWest Group PLC set the pace

With the results season over for the Big Five listed banks, we are getting a better idea of what to expect in terms of dividends.

The Prudential Regulation Authority (PRA) lent on the banks a year ago as the coronavirus pandemic got its teeth into the UK economy to persuade them to suspend dividend payments but in December last year, it eased the restrictions.

The regulator stipulated it would “expect to be satisfied that any distributions would not create excess vulnerabilities to stress for a given bank or impede its ability or willingness to support households and businesses.”

Not all of the banks were convinced of the need to suspend dividend payments (and share buybacks) in the first place so you can bet many of them were champing at the bit to be as generous as they dared so let’s have a look at what they actually paid and how it compares to pre-suspension payments.

Barclays

() paid a dividend of a penny but argued that it was actually returning the equivalent of 5p because it also announced a resumption of its share repurchase programme.

The market was expecting the dividend to be bigger and the size of the share buyback – £700mln – suggests there is scope for the pay-out to be cranked up when circumstances permit.

The bank more than doubled provisions for bad debts and if it turns out it overcooked this number, leeway will be there for a bigger payment.

Prior to the pandemic, Barclays paid a dividend of 7p. If it returns to that level of payment, then at its current share price it would yield a handy 4.2%. Broker forecasts suggest the projected yield for this year will be closer to 3.2%.

Asia-focused bank Holdings PLC () makes things a bit difficult for UK investors by declaring its dividends in US currency and paying them quarterly.

In its full-year results statement for 2020, it declared a dividend of 15 cents, which is about 10.75p. Analysts had expected a pay-out of around 10.1p.

Before the pandemic, the bank’s quarterly dividends were 10 cents, which was equivalent to a bit below 8p a quarter in 2019.

Based on that, a payment of 15 cents looks like a step-up. It is tempting to extrapolate that dividend to a full-year pay-out of 60 cents, which is roughly 43p, giving an unlikely dividend yield of exactly 10% as the shares currently trade at around 430p.

Broker forecasts, which might be subject to revision following HSBC’s recent results, suggest a yield of 3.7% is nearer the mark.

The bank said it will target a payout ratio of between 40% and 55% of reported earnings per ordinary share (EPS) from 2022 onwards.

PLC () declared a final dividend of 0.57p, which was the maximum allowed under the PRA’s guidelines.

The board said it intends to resume its progressive and sustainable dividend policy once the PRA takes…