Most of our ASX banking shares are known for mostly one thing – big, fully franked dividends. Shares of Commonwealth Bank of Australia (ASX: CBA) or Westpac Banking Corp (ASX: WBC) are staples of income-orientated portfolio’s and you’re definitely not considered a ‘real’ dividend investor unless you’ve got ‘Big Four’ exposure. However, our big banks are looking somewhat tired, especially after the appalling revelations that stemmed from last year’s Royal Commission.
Profit growth has slowed and one of the ‘Big Four’ have been forced to cut its dividends over the past year (and in my opinion, it won’t be the only one). There is one ASX banking stock that I would feel very comfortable owning until I retire, and long after that.
Enter Macquarie Group Ltd (ASX: MQG)
Macquarie is often called our ‘fifth bank’, but on the inside, its business structure is quite different to the likes of Westpac.
Westpac and the other majors are primarily retail banks, meaning that they earn most of their money from retail banking services like mortgages, credit card and loans (basically everything you go to the bank to do).
Macquarie does offer some ‘normal’ banking services, but only 10% of Macquarie’s revenue comes from this corner of the market.
Macquarie is predominantly an investment bank, with about half its revenue coming from its MacCap and Commodities and Global Markets divisions. Another quarter hails from Macquarie’s Asset Management business, which has grown considerably over the past decade (including 17% growth last financial year) and now places Macquarie in the top 50 global asset managers, with $551 billion of funds under management. Macquarie offers both a range of in-house managed funds as well as its popular ‘Macquarie Wrap’ investment management platform.
Macquarie’s share price has rewarded investors handsomely over the past decade, with MQG shares rising over 400% over the last 7 years.
What about income?
As alluded to, Macquarie is also a formidable income share. Macquarie has a healthy (if somewhat lumpy) history of paying a solid dividend yield. At current prices, Macquarie is yielding 4.51% (partially franked), which is certainly a nice income for a share that has delivered such solid capital growth.
Macquarie is definitely my favourite banking stock on the ASX and I think Macquarie shareholders will continue to receive both healthy capital growth and a solid income stream from this company. Although Macquarie shares aren’t exactly cheap at the moment, you could certainly do a lot worse than this stock in today’s market, especially in the financial space.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group 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.