Westpac's bumper dividend payout

Westpac will have distributed 85% of FY13 cash profit to shareholders in the form of dividends this year, up from 77% last year, due in part to a special dividend of 10 cents per share announced earlier this week.

The decision to go ahead with a special dividend comes just days after the Australian Prudential Regulation Authority cautioned banks to limit dividend payouts to shareholders. It is also the second special dividend Westpac has announced this year. In May, shareholders were rewarded with a 10 cent per share special dividend in addition to the interim dividend of 86 cents per share.

All up, Westpac will have paid out dividends of $1.94 per share, fully franked for FY13.

"A 10 cent special dividend would amount to about 10 basis points of capital…we've plenty of head-room to absorb the Lloyds acquisition and still remain comfortably above our target range and be comfortably ahead of our peers," chief executive Gail Kelly reportedly said at an investor briefing yesterday.

The group’s common equity tier-one ratio is currently the highest among the big four banks, at 9.1%, and above its preferred range of 8-8.5%.

Earlier this week Eureka Report’s Cliona O’Dowd took a closer look at the ongoing hunt for yield, see Overdosing on yield stocks.