Discretionary Payment Conditions Add Uncertainty to BOQ’s Capital Notes 3 Distribution
Bank of Queensland Limited has announced a fully franked quarterly distribution of AUD 1.2412 per Capital Note 3 security, payable in March 2026. The distribution reflects a 4.9784% annualised rate based on the BBSW plus a margin.
- Quarterly distribution of AUD 1.2412 per Capital Note 3 security
- Fully franked dividend with 100% franking credits
- Distribution rate annualised at 4.9784%, linked to BBSW plus 3.40% margin
- Payment scheduled for 16 March 2026, with record date 27 February 2026
- No external approvals required; payment subject to BOQ’s discretion and conditions
Distribution Announcement Overview
Bank of Queensland Limited (ASX – BOQ) has confirmed a new ordinary distribution payment on its Capital Notes 3 (ASX – BOQPG). The announced distribution amount is AUD 1.2412 per security for the quarter ending 15 March 2026. This payment is fully franked, meaning investors receive the benefit of Australian corporate tax credits, enhancing the effective yield.
Distribution Rate and Calculation
The distribution rate is calculated based on the three-month Bank Bill Swap Rate (BBSW) plus a margin of 3.40%, resulting in an annualised rate of approximately 4.9784%. This rate reflects the terms set out in the Capital Notes 3 Prospectus dated 1 November 2022. The distribution period covers 91 days from 15 December 2025 to 15 March 2026.
Payment Timeline and Conditions
The ex-dividend date is set for 26 February 2026, with the record date following on 27 February 2026. The distribution payment is scheduled for 16 March 2026. Notably, no external approvals such as security holder or court approval are required ahead of payment. However, the payment remains subject to the bank’s absolute discretion and the satisfaction of specific payment conditions outlined in the Capital Notes 3 Prospectus.
Implications for Investors
For investors, this announcement confirms a steady income stream from BOQ’s Capital Notes 3, supported by full franking credits that enhance after-tax returns. The linkage to BBSW plus a margin offers a degree of protection against interest rate fluctuations, aligning the distribution with prevailing market conditions. However, the discretionary nature of the payment and the conditions attached mean investors should remain attentive to BOQ’s financial health and regulatory environment.
Context Within BOQ’s Capital Strategy
This distribution is part of BOQ’s broader capital management strategy, leveraging hybrid securities to balance funding costs and regulatory capital requirements. The Capital Notes 3 issuance, with its defined terms and margin, provides BOQ with flexible capital while offering investors a relatively attractive yield in a competitive fixed income market.
Bottom Line?
As BOQ navigates its capital strategy, investors will watch closely how discretionary distributions on hybrid securities evolve amid changing market conditions.
Questions in the middle?
- Will BOQ maintain its distribution payment conditions amid potential economic headwinds?
- How might shifts in the BBSW impact future distribution rates on Capital Notes 3?
- What is the market sentiment around BOQ’s hybrid securities compared to peers?
