According to Australia's leading bank economists, two RBA interest rate cuts are on their way in 2015.
Westpac Banking Corp (ASX: WBC) said two "insurance cuts" of 0.25% will be declared in February and March.
Savers take note, if Westpac's right, we're not far away from around 2% annual returns on savings accounts!
Now appears to be a better time than ever to transition your money away from the poor returns of term deposits.
Big bank stocks are renowned for their ability to pay handsome dividend yields.
Whilst I'm not a buyer of the big four banks stocks at today's prices, there's definitely good reason to keep holding them through the next interest rate cycle.
Of the big banks, the one which I think holds the best potential for dividend and earnings per share growth over the next five years is Australia and New Zealand Banking Group (ASX: ANZ).
Here are three reasons I'd continue to hold ANZ shares throughout 2015.
1. According to Morningstar, analysts are forecasting a dividend of 188 cents per share, fully franked, in the coming 12 months. Even at today's high share price of $31, it puts ANZ stock on a grossed-up yield of 8.64%.
2. Whilst the local economy grinds to a halt, some countries (including those in Asia) continue to exhibit signs of sound long-term economic growth. ANZ has the largest presence in Asia of the big banks. In FY14 24% of revenues came from foreign markets, with the aim of 25% to 30% by 2017.
3. Although share prices are high, those companies which can deliver on expectations are most likely to offer some downside protection in their share prices. In addition to an implicit 'too big to fail' guarantee from the government, ANZ is expected to grow profits handsomely in coming years and has a high level of profitability, compared to its peers. Thus I believe the size and duration of any share price falls will be somewhat limited by its high quality of earnings.
