Prior to today the Australia and New Zealand Banking Group (ASX: ANZ) share price had rallied an impressive 10% in the space of a month.
This was the strongest gain amongst the big four during the period. As a comparison the Commonwealth Bank of Australia (ASX: CBA) share price is up 5%, the National Australia Bank Ltd (ASX: NAB) share price has gained 7%, and the Westpac Banking Corp (ASX: WBC) share price is 7.2% higher.
Is it too late to buy ANZ Bank shares?
Although ANZ Bank's shares are no longer the bargain buy they were a month ago, they still trade on lower than average multiples and offer a very generous dividend.
I think the latter makes them a very attractive option for savers or income investors in the current low interest rate environment.
Especially when you consider that the bank's online saver account offers a variable interest rate of just 0.5% once the introductory rate ends after three months. This is in line with all four major banks.
In the third quarter of 2018 Australian inflation stood at 1.9%. This means that any funds earning 0.5% interest in one of the bank's online saver accounts are actually seeing their value eroded by approximately 1.4% per year.
Whereas if you were to put those funds into ANZ Bank's shares they'd benefit from its trailing fully franked $1.60 per share dividend, which equates to a 6.2% yield today or 4.3% after inflation. I think this is extremely tempting, even after factoring in the increased risks of investing in the share market.
Should you buy shares today?
While I think that ANZ Bank's shares are in the buy zone today, it is worth noting that the Royal Commission final report is expected to be handed down at the end of next week.
I'm optimistic there will be no nasty surprises within the report and that the worst case scenario has already been priced in, but it may be prudent to hold fire until it is released.
