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The Commonwealth Bank of Australia share price is on the move

The Commonwealth Bank of Australia (ASX: CBA) is up nearly 5% in the past month, surging to trade at around $83.00 currently.

Peers Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) are also trading higher compared to a month ago, but not as well as CBA.

Bank share prices Jul 2017

Source: Google Finance

John Abernethy, Chief Investment Officer at Clime Asset Management says the banks will realise that their dividend payout ratios are too high and that retained earnings is their most sensible capital management approach. If that plays through, bank shareholders will need to get used to lower dividends and dividend yields.

Commonwealth Bank currently yields 5.1% at the price of around $83, but that will fall below 5% if the dividend is cut – although the share price could also get hammered as investors sell out in favour of other income plays.

With the risks rising of bank dividends being cut, Foolish investors should ensure they have exposure to a diversified array of dividend payers – not just the big four banks.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has a position in National Australia Bank Ltd. 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.

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