The market's appetite for Commonwealth Bank of Australia's (ASX: CBA) shares has been restored with the Reserve Bank of Australia now looking increasingly likely to cut interest rates when it meets next week.
The RBA surprised investors when it elected to leave interest rates unchanged at 2.25% earlier this month, citing Australia's inflated house prices as one of the major reasons behind its decision. However, the pace of lending to property investors appears to have eased in February while commodity prices have also plummeted further, giving the RBA more scope to slash interest rates further.
Commonwealth Bank, Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) have all jumped as a result with the shares up 1%, 1.3%, 1% and 0.9% respectively. Westpac is trading within 1% of a new record high at $39.65.
Faced with the prospect of lower interest rates, Australian investors traditionally turn to Australia's biggest dividend payers in the hope of offsetting lower returns from other asset classes, including bonds and term deposits. Unfortunately, all of the banks' shares have become expensive, providing little hope of delivering long-term market-beating returns. Luckily, there are other avenues investors can take to profit from Australia's dividend boom…