With its shares expected to provide a fully franked 6.2% dividend in FY 2017, I believe Westpac Banking Corp (ASX: WBC) is a great option for income investors who don't already have exposure to the banking sector.
Whilst there will always be fears floating around that a dividend cut is in the works, I personally believe that Westpac is in a strong enough position to at least maintain its dividend over the next couple of years.
But even if Westpac did have to cut its dividend, it certainly wouldn't be the end of the world for investors.
In May of this year, Australia and New Zealand Banking Group (ASX: ANZ) was forced to cuts its interim dividend for the first time since the Global Financial Crisis. Contrary to what doomsayers were predicting, since ANZ cut its dividend by 6 cents per share its share price has actually climbed by a massive 19%.
During the same period, Westpac's shares have climbed just 1.5% and the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is higher by 4.5%. Surprisingly this strong run means ANZ is the only bank within the big four which is in positive territory this year.
So should you invest in Westpac today? Although they aren't as cheap as they were a few months ago, I still believe its shares are at a reasonable price for an investment today. The strong dividend it pays in this low-interest environment is invaluable for those in search for income.
One word of warning though. Westpac will be releasing its full year results within the next few weeks. Following a solid first half, I feel confident that the bank will report a modest lift in full year cash profits. But if its second half performance disappoints there could be a slight pull back in its share price.
Investors may want to wait until Westpac reports before deciding whether to pull the trigger.
