Australia and New Zealand Banking Group’s 5.4% dividend yield

Could now be a good time to snap up this juicy fully franked dividend?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Australia and New Zealand Banking Group (ASX: ANZ) has proven to be a great long-term buy and hold type of investment. Despite a GFC and numerous other setbacks, investors who bought ANZ 10 years ago would be sitting on 82% capital gains and an additional 74% return in the form of dividends.

By comparison, the S&P/ASX 200 (ASX: XJO) (^AXJO) has returned just 52%.

But ANZ could be about to get even better. Given its track record for dividend distributions and the possibility of higher cash earnings, I wouldn’t be surprised if ANZ’s board elect to distribute a dividend of $1.80 per share in the next 12 months. That would put it on a forecast dividend yield of around 5.4% at today’s share price.

So much for low interest rates…

However I also believe ANZ’s dividend is likely to continue growing in the medium to long term with higher earnings per share. With a focus on Asian trade flows, international banking and foreign exchange, the bank is busy differentiating its revenue streams away from the slow growing markets of Australia and New Zealand. This is in contrast to its successful but domestically focused peers such as Commonwealth Bank of Australia (ASX: CBA).

With cash profit from Asia, the Pacific, Europe and Americas (APEA) markets now accounting for over 19% of the bank’s total, it appears CEO Mike Smith’s long-term ‘Super Regional Strategy’ will (literally) start paying dividends in the near future.

Unlike Westpac Banking Corp (ASX: ANZ), ANZ’s net interest income (that is, income derived from lending practices) and operating income (things like wealth management and insurance) has grown for all three of the most recent half-yearly reporting periods. With increased investment and rising prosperity in Asian countries, the bank’s branch rollout and foreign exchange services will likely benefit.

To buy, or not?

Despite the possibility of rising dividends and earnings growth, ANZ trades on a fairly lofty valuation by global banking standards and investors considering buying shares at current prices will have to be content with not getting a bargain. It’s something I wouldn’t be prepared to do.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »