Shares of Australia's big four banks have exploded this week following the Reserve Bank's surprise interest rate cut.
Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Corp (ASX: ANZ) all closed at all-time highs on Thursday, while National Australia Bank Ltd. (ASX: NAB) closed at its highest level in seven years.
Despite their somewhat lofty valuations, their generous dividend yields continue to act as a magnet for investors. With term deposits and bonds offering returns that are hardly even worthwhile, each of the banks are tipped to yield in excess of 4.5% this financial year, fully franked. Commonwealth Bank offers the lowest yield while National Australia Bank is tipped to yield a massive 5.6%, or 8% when grossed up.
While their yields might be appealing, investors would likely do better over the long-term by investing in a company offering a solid dividend in addition to strong growth prospects, just like the one recently identified by our top investment advisor, Scott Phillips.
