Is the ANZ share price a buy for the 8% dividend yield?

Is the Australia and New Zealand Banking Group (ASX:ANZ) share price a buy for the 8% dividend yield?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is the Australia and New Zealand Banking Group (ASX: ANZ) share price a buy for the 8% dividend yield?

What a difference a week makes! A week ago the banks seemed on course for months more of troubles but now there's lots of positive signs.

No negative gearing. Lower interest rate buffer from APRA. An expected lower interest rate from the RBA.

What's more is that shareholders get to keep their franking credit refunds from all ASX shares like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB).

Suddenly the outlook looks more positive for developers, construction materials businesses etc. Or so commentators are saying.

I'm unsure about whether everything can be fixed so easily. Businesses were finding it tough whilst the Morrison government was still in power before the election, so nothing has changed in terms of who is in charge.

The tax reductions and increased tax offsets for taxpayers may provide a boost, and a lower APRA interest buffer could be useful.

But, it is ANZ's current loan book which is seeing rising mortgage arrears of more than 90 days. Will a slight decrease of the RBA interest rate really help out that situation? Only time will tell.

Tight household budgets and low wage growth are still problems and residential property construction jobs could still come under pressure.

Foolish takeaway

I truly hope that things do turn around, no-one wants a recession. But I'm not ready to believe that ANZ's shorter-term earnings prospects are that much better than last week.

The only key difference is that investors will still receive their franking credit refunds, leading to a grossed-up dividend yield of 8%. This seems like a solid yield, but I would prefer to own ASX shares with a more dependable dividend.

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.

More on Bank Shares

A corporate female wearing glasses looks intently at a virtual reality screen with shapes and lights representing Block shares going up today
Bank Shares

Are Westpac shares a buy following the bank's big tech update?

Is now a good time to buy the banking giant's shares? Let's find out.

Read more »

Different Australian dollar notes in the palm of two hands, symbolising dividends.
Bank Shares

Own CBA shares? It's payday for you!

A dividend is heading to CBA shareholders’ bank accounts.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Are CBA shares really worth $120?

It has been a good year for ASX bank shareholders.

Read more »

a group of people sit around a computer in an office environment.
Bank Shares

Westpac shares push higher on $9.8b technology simplification plan

Westpac plans to spend big on technology to close the gap on its rivals.

Read more »

A worried woman looks at her phone and laptop, seeking ways to tighten her belt against inflation.
Economy

NAB boss issues dire prediction for Aussie economy

NAB’s CEO has issued a stark warning on the outlook for Australia’s economic growth.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Bank Shares

Own CBA shares? Here's the tech stock the banking giant just invested in

CBA has made an interesting investment. Here's what you need to know.

Read more »

A woman gives two fist pumps with a big smile as she learns of her windfall, sitting at her desk.
Bank Shares

ANZ shares charge higher on $57.5 million class action settlement news

ANZ shares have continued their positive run on Monday.

Read more »

Two people comparing and analysing material.
Bank Shares

Better buy: CBA or Westpac stock?

Which ASX bank share is a better buy?

Read more »