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The big bank dividend giveaway starts this week!

The banks’ dividend bandwagon keeps rolling on. Three of Australia’s biggest four banks are expected to announce increases in their dividends from later this week.

ANZ Bank (ASX: ANZ) is expected to increase its interim dividend by nearly 10% to 80 cents a share when it reports its first half results on Thursday May 1. Analysts are expecting the bank to report an 8% increase in cash earnings to around $3.4 billion, thanks to falling bad loans and improving credit quality. ANZ had previously stated that bad and doubtful debts would fall by 10% this year.

National Australia Bank (ASX:NAB) and Westpac Banking Corporation (ASX:WBC) will also deliver their results next week, with the latter predicted to report $3.75 billion in cash earnings and a 4 cent increase in the interim dividend to 90 cents a share. National Australia Bank is forecast to grow its earnings by 4% to around $3 billion, and up its dividend by 5 cents to 98 cents a share.

But UBS analysts say National Australia Bank could disappoint the market, after its first-quarter results showing continued problems with its UK businesses.

Commonwealth Bank of Australia (ASX: CBA) has a June year end, but is expected to provide a trading update mid-way through May. In February, Commbank reported a record interim profit of $4.27 billion for the six months to December 2013.

For some time now we have been wary of the banks and their valuations. In December 2013, UBS analysts said the big four banks were among the world’s most costly, but that hasn’t stopped them rising this year, with Westpac shares soaring 12.6% and ANZ Bank’s shares adding another 9% since the beginning of this year.

Foolish takeaway

While the Australian economy is sailing along nicely, there’s really no big threat on the horizon to threaten the big four banks’ dividends and they could continue to pay growing dividends for years.

The problem for bank shareholders is that despite the lovely fully-franked dividends and relatively high yields, rising unemployment or a decent fall in Australian property prices could trigger a double whammy hit to bank earnings. Rising bad debts and low and/or negative credit growth would likely see bank share prices walloped, wiping out more than the 5 or 6% dividend yield they are currently paying. Buyer beware.

Attention bank shareholders!

Fact: Australia's large banks had an incredible run in 2013. But some top analysts are saying the trend could stop dead! Get the inside scoop in The Motley Fool's brand-new FREE investment report, "What Every Bank Shareholder MUST Know."

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

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