With Aussie interest rates being just 2.5% and having the potential to go lower, it's a painful time for savers and income investors. However, shares in our banks could offer a solution via top notch dividend yields. Here are three banks that offer sweet yields, trade at reasonable valuations and are forecast to grow earnings.
Commonwealth Bank of Australia
With a fat, fully franked yield of 5.3%, Commonwealth Bank of Australia (ASX: CBA) certainly ticks the 'income' box when it comes to investing. However, better still is the fact that the bank's dividends are well-covered and sustainable.
Indeed, dividends are presently covered 1.3 times by profit and, with earnings expected to increase at an annualised rate of 5.6% over the next two years, it means that a brisk pace of dividend growth should take place. With shares trading on a P/E ratio of 14.4, there could be upside in the share price too.
Westpac Banking Corp
Also having a fully franked yield is Westpac Banking Corp (ASX: WBC), with shares in the bank currently yielding an impressive 5.5%. Although dividends per share are set to remain relatively flat over the next couple of years, this still represents a yield above that available from deposits.
With earnings growth of 4.9% per annum forecast for the next couple of years, Westpac seems to be a relatively safe income play. As with Commonwealth Bank, a P/E ratio of 13.7 indicates upside versus the ASX, which has a P/E ratio of 15.6.
Australia and New Zealand Banking Group
With the highest earnings growth forecasts of the three banks featured here, Australia and New Zealand Banking Group (ASX: ANZ) has the potential to raise dividends per share at the fastest rate.
That's not to say that the current fully franked yield of 5.4% is shabby, just that shares in the bank could be yielding as much as 5.9% in 2015. With a P/E ratio of 12.4, there could also be scope for price appreciation. Especially once the market realises that ANZ's bottom line is due to rise at an annualised rate of 10.7% over the next two years.
