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Which ASX bank has the biggest dividend yield?

The best place to look for income is probably the ASX. Shareholders of Australian businesses benefit from the very pleasing bonus of franking credits.

A business offering a 7% fully franked yield means we could be getting a grossed-up dividend yield of 10%.

ASX banks have created a reputation for paying out very big yields. They make a lot of money and are valued at a low price/earnings ratio compared to most other ASX shares.

Based on the current share prices and trailing dividends, these are some of the biggest yields on offer:

Bendigo and Adelaide Bank Ltd (ASX: BEN) has a grossed-up dividend yield of 9.2%.

Bank of Queensland Limited (ASX: BOQ) has a grossed-up dividend yield of 10.9%.

MyState Limited (ASX: MYS) has a grossed-up dividend yield of 9.1%.

Australia and New Zealand Banking Group (ASX: ANZ) has a grossed-up dividend yield of 9.2%.

Commonwealth Bank of Australia (ASX: CBA) has a grossed-up dividend yield of 8.5%.

Westpac Banking Corp (ASX: WBC) has a grossed-up dividend yield of 10.5%.

National Australia Bank Ltd (ASX: NAB) has a grossed-up dividend yield of 11.6%.

NAB, Westpac and BOQ all offer grossed-up yields of more than 10%. That’s a huge starting yield. I can see why retirees are so attracted to the banks for income.

However, those yields are historical and are reliant on earnings to be maintained. As Telstra Corporation Ltd (ASX: TLS) has shown, some companies may cut their dividends.

If I had to choose two of the above banks for potential income ideas it would be Westpac and Mystate. Westpac has the longest history out of the big four and is regularly recognised for its ‘sustainable’ approach, although the Royal Commission has tarnished this somewhat. The Tasmania house market is going quite well in recent times, which should mean Mystate fairs better in a downturn compared to other banks more focused on Melbourne and Sydney.

Westpac (and all other banks) are linked to the strength of the Australian housing market, so it wouldn’t be my preferred investment choice today.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of MyState Limited and National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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