Is NAB a good passive income stock?

National Australia Bank Ltd (ASX: NAB) has long been a popular choice among Australian income investors.

With a large banking franchise, fully franked dividends, and a solid earnings outlook, I think there is still plenty to like for investors seeking passive income.

Here is why.

The dividend looks attractive

NAB shares are currently trading around $38.29.

According to CommSec, consensus forecasts point to fully franked dividends per share of $1.70 in FY26 and $1.72 in FY27.

At today’s share price, that represents a forward dividend yield of around 4.4% in FY26, rising slightly to 4.5% in FY27 before franking credits.

I think that is a solid level of income from one of Australia’s largest banks.

The expected growth in the dividend is modest, but I would rather see a payment that looks well supported than rely on an unusually high yield that could prove difficult to maintain.

Earnings should provide support

The outlook for profits gives me further confidence.

Consensus estimates are for NAB to generate earnings per share of $2.38 in FY26 and $2.54 in FY27.

That would represent earnings growth of around 7% in FY27 while the dividend is forecast to rise only slightly.

If those forecasts prove accurate, NAB would be retaining a greater proportion of its earnings rather than needing all of the growth to fund higher distributions.

I think that leaves the bank in a sensible position to continue rewarding shareholders while maintaining capital for the business.

Of course, bank earnings can be affected by bad debts, competition, interest rates, and economic conditions. Dividends are never guaranteed.

But the current forecasts give me confidence that NAB’s income outlook remains healthy.

I like the business behind the dividend

For me, a passive income investment still needs a business I would be comfortable owning.

One of NAB’s biggest strengths is its position in Australian business banking.

Companies need loans, transaction accounts, deposits, payments, and other financial services as they operate and expand. These relationships can become increasingly valuable as successful customers grow.

NAB also has a substantial personal banking franchise, giving it exposure to millions of households alongside its position with Australian businesses.

I think that combination gives the bank several sources of earnings to support future shareholder returns.

Foolish takeaway

I believe NAB is a good passive income stock at around $38.29.

A forecast yield of roughly 4.5%, full franking, and expected earnings growth make the income outlook attractive to me.

There will always be risks with owning a bank, but I think NAB has a strong enough underlying business to make it a worthwhile option for investors hoping to generate regular income from ASX shares.