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Is the Westpac share price a buy for its 10% dividend yield?

Is the Westpac Banking Corp (ASX: WBC) share price a buy for the dividend yield on offer?

That dividend sure looks attractive, doesn’t it? Westpac has paid the same annual dividend of $1.88 per share over the past three years. This translates to a dividend yield of 7%, or 10% when grossed-up for franking credits.

If you were after income would you rather earn interest from one of Westpac’s savings accounts earning a bit over 2%, or 10% from the dividend yield?

Obviously the dividend is far more risky, the dividend nor the share price is guaranteed.

But, I think the dividend fairly compensates us for the risk compared to the interest rate from a savings account, unless you’re saving for something over the shorter-term like a house deposit.

Westpac is supposedly higher quality than National Australia Bank Ltd (ASX: NAB) but it has a materially higher dividend yield than Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group (ASX: ANZ).

I particularly like to consider businesses that have a long operating history because it shows they have good longevity. Westpac can trace certain elements of its history back over 200 years and it plans to be around for another 200.

Foolish takeaway

There are quite a few problems facing the major banks like the Royal Commission remediation and the falling housing market, but over the long-term the banks will probably be writing bigger loans to more households. For this reason, I think Westpac could be worth considering for income with it trading at only 11x FY19’s estimated earnings.

Westpac isn’t the only potentially good income share on the stock market, these ASX dividend shares are all high-quality income payers.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of 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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