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On March 6, the Minister of Finance announced that the government plans to sell a shipment of NatWest (LSE:NWG) shares. We don't know when this will happen, but reports suggest it could be in June.
The high street bank's shares currently offer an attractive dividend yield. Should I invest in this? FTSE 100 shares for passive income in my stocks and Shares ISA? Let's discuss.
Dividends are flowing again
In 2018, almost ten years to the day RBS (now NatWest) was bailed out by the British taxpayer, the bank reinstated its dividend. Except for some interruptions during the pandemic, it has been paid regularly since then.
| Financial year | Dividend per share |
| 2026 (forecast) | 18.3p |
| 2025 (forecast) | 17.8p |
| 2024 (forecast) | 15.7p |
| 2023 | 5.0p |
| 2022 | 13.8p |
| 2021 | 11.3p |
| 2020 | 3.2p |
| 2019 | 2.1p |
| 2018 | 5.9p |
However, it is interesting to note that all of these payments combined do not come close to the single final dividend of 194 pence per share paid in May 2008.
This really reminds us how important it is to build a diversified income portfolio made up of companies from different sectors. There are no sure dividends, not even from established banks.
High-yield passive income
That said, the dividend prospects look attractive. As we can see above, the current expected dividend for 2024 is 15.7 pence per share.
Based on the current share price of 254p, this translates to a dividend yield of 6.2%. In 2025, with an expected dividend of 17p, the potential yield rises to an attractive 6.7%. Then, 7.2% in 2026.
Therefore, from a £10,000 investment, you could expect to receive around £2,038 in dividends over the next three years. That, of course, is assuming that the brokers' forecasts are accurate, which is not always the case.
If I invest before March 14, I would also be entitled to the final dividend announced for the last financial year. That would add an extra £452 or so.
These payments for 2024 and 2025 are covered 2.4 and 2.3 times by the respective expected earnings. That suggests these eye-catching dividends are more than likely to be paid.
Risk to consider
In 2023, NatWest's total revenue rose almost 11% year-on-year to £14.7bn, while pre-tax profit soared 20% to £6.2bn. This benefit was the largest since 2007.
However, this was driven upward by higher interest rates. And now the consensus is that rates have peaked and will fall later this year. This means that the bank's profits may also have peaked.
Meanwhile, the row over Nigel Farage's unseating continues, which could lead to headlines and short-term share price volatility.
Should I invest?
Interestingly, it seems likely that the government will offer individual investors NatWest shares at a discount to the share price.
I see that advertising agency M&C Saatchi has been hired to promote this retail offering. So I hope to hear a batch more about this.
However, I note that the stock is already very cheap, trading with a price-to-book (P/B) ratio of just 0.65. So it will be interesting to see how this develops.
I have been shopping recently HSBC actions to sit next to Lloyd's. I'm a little worried about overexposure to FTSE 100 banking shares. But I'll wait to see the details of the NatWest share offer.
