Until very recently, shares in the major banks and supermarkets were on fire.

However, for various reasons the market’s perception of safe growing assets appears to have changed, pushing down the share prices of these ASX blue chips.

Consequently, their trailing fully franked dividends yields have ballooned higher:

  • Commonwealth Bank of Australia (ASX: CBA) – 5.6%
  • Westpac Banking Corp (ASX: WBC) – 6.1%
  • National Australia Bank Ltd. (ASX: NAB) – 7.1%
  • Australia and New Zealand Banking Group (ASX: ANZ) – 7%
  • Wesfarmers Ltd (ASX: WES) – 4.8%
  • Woolworths Limited (ASX: WOW) – 5.5%

But are the yields sustainable?

Supermarkets

You only need to look as far as Woolworths’ share price to see what can happen if your management team becomes complacent. For Wesfarmers, which has been outperforming Woolies for many years now, the team and performance has gone from strength to strength. Coles, Bunnings Warehouse, Kmart, and Officeworks are market leaders and growing their business lines.

However, the fear among most supermarket shareholders is competition. Coles has been growing fast at the expense of Woolworths, but is unlikely to keep growing that easily. Combined with competition from Aldi and to a lesser extent Costco (not to mention Amazon), the profit growth from Wesfarmers is not be set in stone.

While Wesfarmers is a far greater dividend proposition than Woolworths for those seeking income, it’s not without risk.

Banks

Three of the major banks reported interim results this week. In a recent blog post, KPMG’s National Sector Leader, Ian Pollari, noted the declines in combined profits were a result of increasing impairments, technology related charges and one-off impairment and restructuring costs.

“The aggregate charge for bad and doubtful debts increased AUD834 million to AUD2.5 billion in the first half, up 49 percent on the first half of 2015,” he wrote.

Given the cyclicality of the banking sector, investors must be mindful of the potential to encounter extended periods of lacklustre profits and dividends. While the recent history may seem to rebuff any notion of it, there will likely come times when the banks are forced to cut dividends and margin squeezes. By cutting its interim dividend and forecasting a lower full-year payout, ANZ is the perfect example.

That’s not to say all banks will disappear overnight — far from it — though investors should ensure they pay good prices for any new share positions and maintain a diversified portfolio.

Which share is right for your portfolio?

Bank dividend yields appear very generous, especially in the low-interest rate environment. Commonwealth Bank has proven to be the best bank among the majors for many years, while Wesfarmers is a clear favourite in supermarkets. If I were to pick one share for income today, it’d be Commonwealth Bank.

However, it’s important to note that I’m not a buyer of Commbank shares at today’s prices because I’d like to take a closer look at its annual report later in the year to better assess the likelihood of rising impairments.

Rather than buy bank shares, I'm looking for other - faster growing - dividend shares to add to my portfolio, like the one The Motley Fool's expert analysts hand-picked as their best dividend share idea for 2016.

Indeed, our resident dividend experts named their Top Dividend Share for 2016. Not only are the shares dirt cheap, the company is growing and trading on a 5.6% fully franked dividend yield. Simply click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required!

HOT OFF THE PRESSES: Motley Fool’s #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.