Shares in Australia and New Zealand Banking Group (ASX: ANZ) have just capped-off another stellar financial year notching up 15% returns, not including dividends, to open today at $32.84.
Over the past five years however, ANZ’s share price is up a stunning 100% and the bank has paid out an additional $7.14 in dividends, representing a total gain of 144%. By comparison the share prices of Westpac Banking Corp (ASX: CBA) and National Australia Bank Ltd. (ASX: NAB) are up 67% and 45%, respectively. The S&P/ASX 200 Index (ASX: XJO) (INDEX: ^AXJO) is up just 37%.
So it’s clear. Savvy investors are now realising the potential of ANZ to generate market-beating returns. More so than any of the other big banks.
But it could get even better because, in the next year, analysts are continuing to be bullish on our Super Regional Bank and forecasting 18% earnings per share growth with a full-year dividend of $1.76, putting it on a forward P/E ratio of 13 and dividend yield of 5.4% fully franked. Commonwealth Bank of Australia (ASX: CBA) currently offers a 4.7% dividend yield.
However, despite the likelihood of higher earnings (compared to its peers) and a growing dividend payment, some investors have become concerned ANZ and each of the other Big Four banks are expensive. I agree.
The best time to buy banks shares (like any stock) is during times of huge uncertainty, when fear rules the market. For example, between October 2007 and April 2009, the banks dropped more than 50%. ANZ went from $31 per share to $12 in just 18 months.
A 7% dividend yield to buy today!
ANZ is the best big bank and the only one I’d consider adding to my portfolio, however I’m waiting for a lower entry price before committing my hard-earned investment dollars. But there are over 2,000 companies listed on the ASX and many are cheaper, growing faster, and likely to pay a bigger dividend than the banks!
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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.