Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) shares are offering enormous dividends to share market investors.
Despite its recent woes, ANZ Banking Group is expected to offer a dividend of $1.61 per share in the year ahead, equivalent to a dividend yield of 6.4% — fully franked.
That's a substantial premium to term deposits and savings accounts which at most major banks are offering around 2%.
Meanwhile, Westpac shares are also in the race for your investment dollars. With a forecast dividend payment of $1.88 (fully franked), its shares are expected to yield 6.3%. Grossed up for those franking credits, its yield increases to 9%. If you're investing in a low tax structure like a self-managed superannuation fund (SMSF) the benefit of dividends cannot be overlooked.
Why I'm avoiding these two ASX bank shares
While ANZ Banking Group and Westpac Bank shares appear fantastic investments on first glance, there are reasons why they are cheap.
Much of the market's uncertainty likely stems from their recent share price falls. Both ANZ and Westpac shares have fallen 10% in 2016 and underperformed the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), by similar amounts.
However, the expectation of cooling property prices, increasing bank regulation, falling dividend payments and rising competition are adding further doubt to their outlooks.
Personally, I think it's too early to buy shares in either bank — especially if you are already meaningfully exposed to the sector — because the risks appear weighted to the downside at today's prices.
Indeed, while shares in both banks appear attractive income investments, I'm holding off until the end of the year before taking any action.
