Instead of sitting on their hands and waiting for interest rates to improve, a few years ago, savvy investors made the decision to buy bank shares. As a result, over the past three years, they’ve been handsomely rewarded.
However with predictions for even lower interest rates in the near future, it seems some of the banks will continue to benefit from new money entering the market. The three highest yielding banks are National Australia Bank Ltd. (ASX: NAB), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ).
1. NAB. With analysts expecting a dividend of $2.00 per share (or more) in the coming 12 months, NAB has a forecast yield of 5.67% fully franked, or 8.1% grossed-up.
2. Westpac. At a touch over $34 per share, Westpac shareholders are likely expecting a dividend of $1.82, giving it a grossed-up dividend yield of 7.6%.
3. ANZ. Until FY16 our ‘Super Regional’ bank is tipped to grow earnings at a rate faster than any of its peers. With higher earnings per share comes increased anticipation of a bigger dividend payout. It is currently trading on a forecast dividend yield of 7.5% grossed-up.
Buy, Hold or Sell?
In my opinion, ANZ is the superior big bank stock. However even its share price doesn’t scream bargain to me. With low interest rates inflating share prices yet, relatively little growth tipped for the near future, in my opinion none of these three bank stocks are a buy at today’s prices.
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