Australia’s big four banks have been great investments for yield-seeking investors for many years. Not only have they delivered yields around 6% for many years, but Australia’s unique franking credit system has made returns even greater for local shareholders.
For financial year 2014, which ends on 30 September for National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC), and on 30 July for Commonwealth Bank of Australia (ASX: CBA), all four banks will deliver a dividend yield over 5% franked at 100%.
NAB has been the standout for yield investors with a forecast yield of 5.6%, based on its current price, followed by 5.2% for WBC, 5% for ANZ, and 5% for CBA. Lucky investors that were able to buy shares during share price dips during the year would have also received between 7% and 16% from capital gains.
Bigger yields in 2014/15
The 2014/15 financial year is expected to be yet another year of increasing dividend payouts from the big four banks. Analyst estimates point to a 5% increase from NAB, a 3% increase from WBC, a 4.6% increase from ANZ and a 4% increase from CBA.
NAB to deliver yet again in 2015
Based on the analyst forecasts, NAB is again expected to deliver the biggest yield in 2014/15. NAB’s yield of 5.9% fully franked, or 8.4% grossed up to account for franking credits, is well above the 2% to 3% available in term deposits, and the 4.6% average yield of the ASX 200.
The other three banks’ 2014/15 yields are estimated to be between 5.2% and 5.3%, well below that of NAB, and also below that of two of their smaller competitors. Bank of Queensland Ltd (ASX: BOQ) and Bendigo and Adelaide Bank Limited (ASX: BEN) have forecast yields of between 5.6% and 5.7% fully franked and are reasonable alternatives to their larger, and slower moving rivals.
Yield-hungry investors have been drawn to Australia’s big four banks in search of a solid dividend payout. The yields on offer are still attractive, however investors should note that buying into bank stocks now carries a greater risk of capital losses than in previous months and years.