With big juicy fully franked dividends, excellent track records and an implicit government guarantee, there's much to like about owning shares in a big four bank.
Despite being the third largest major bank, behind Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) could likely prove to be the best big bank stock to own in the next decade.
Unfortunately, at today's prices it doesn't come cheap and prudent investors are advised to hold off buying shares, until we see a meaningful contraction.
However, for existing shareholders, there are many reasons to keep holding your investment through the next market cycle…
1. International growth. In 2007, current CEO Mike Smith launched the bank's 'Super Regional Strategy'. He has a goal of deriving 25% to 30% of group revenues from Asia, the Pacific, Europe and Americas (APEA) markets by 2017. And so far so good. In 2014, 24% of group revenue came from APEA markets.
2. Dividends. In the coming year, analysts are forecasting a dividend of $1.85 per share, putting the bank on a yield of 5.5% fully franked, or 7.8% grossed-up.
3. Defensive characteristics. ANZ is considered a systemically important bank and is required to adhere to strict capital requirements, in the event of a severe market setback. Bankers have argued, justifiably, that the requirement adversely affects profitability. However it also gives shareholders confidence in the bank's ability to remain afloat in the toughest of times. ANZ had a common equity tier 1 ratio of 8.79% at 30 September 2014.
A better dividend stock than ANZ
ANZ is uniquely placed to grow into the booming markets of Asia, yet offers the defensive characteristics many risk-averse investors search for. However at today's prices it appears fully valued. Therefore investors would be wise to look at other ASX dividend stock ideas, which are trading cheap (see below).
