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Which ASX bank has the biggest dividend yield?

Dividends

I believe the best place to look for income is on the ASX. Shareholders of Australian companies (currently) benefit from the very juicy bonus of franking credits.

If a regular large ASX company has a 7% fully franked dividend yield it means you might be receiving a 10% grossed-up yield. You could be getting market-beating returns from just the dividends alone!

ASX banks have an impressive reputation for having very large dividend yields. They are very profitable and are priced at low price/earnings ratios compared to most of the typical businesses on the ASX.

Looking at the current share prices, these are some of the leading bank contenders for dividend yields:

MyState Limited (ASX: MYS) has a grossed-up dividend yield of 9.6%.

Bendigo and Adelaide Bank Ltd (ASX: BEN) has a grossed-up dividend yield of 10.3%.

Bank of Queensland Limited (ASX: BOQ) has a grossed-up dividend yield of 11.8%.

Australia and New Zealand Banking Group (ASX: ANZ) has a grossed-up dividend yield of 8.8%.

Commonwealth Bank of Australia (ASX: CBA) has a grossed-up dividend yield of 8.7%.

Westpac Banking Corp (ASX: WBC) has a grossed-up dividend yield of 10.4%.

National Australia Bank Ltd (ASX: NAB) has a grossed-up dividend yield of 11.3%.

Those sure are hefty dividend yields! Westpac, BOQ, Bendigo Bank and NAB all have grossed-up dividend yields of over 10%. That’s a massive yield to start with. Can you see why SMSF investors are so attracted to the banks?

But remember, dividends are not guaranteed, even if they are less volatile than share prices. As we’ve seen from Telstra Corporation Ltd (ASX: TLS), large caps cut their dividends too.

If I had to narrow it down to three banks and rule out the rest I would pick Mystate, Westpac and NAB. Mystate’s predominately come from Tasmania, which seems to have the healthiest housing market at the moment. NAB is the cheapest of the big four ASX banks and could be one to watch with its new management. Westpac has the longest operating history and is regularly judged as the most ‘sustainable’ of the big banks.

However, all the ASX banks derive a lot of their earnings from the Australian housing market, so I wouldn’t be inclined to buy shares of any of them at the moment.

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Returns As of 6th October 2020

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