Like many of the ASX banks, the Australia and New Zealand Banking Group (ASX: ANZ) share price has had a solid 2019 so far.
ANZ shares started the year at $23.86, but this morning have opened at $27.06 – representing a YTD price gain of 13.4% (not including ANZ's dividend).
Speaking of dividends, ANZ has maintained a payout of $1.60 per share since 2015. On current prices, this represents a yield of 5.91%, or 8.44% if you include the value of franking credits. This creams any term deposit or savings account you could open at ANZ, so is this juicy dividend yield enough of a reason to buy ANZ shares today?
Why ANZ has had a good year
Like the other 'Big Four' banks such as Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), ANZ has benefitted this year from the winding down of the 2018 Royal Commission, which seriously weighed on investor sentiment throughout 2018. Combining this with the surprise Coalition election victory in May, and we have some significant short-term tailwinds that have lifted the ANZ share price.
ANZ also had a share buy-back program in place until March, which would have been a significant boost to both the company and ANZ shareholders. Around 108 million shares were bought off the market in the twelve months to March, which increases the value of all remaining shares. I think this was very fortuitous timing, as the ANZ share price was at very low levels for most of this buy-back period – further increasing the benefits to shareholders.
Is the ANZ share price a buy today?
Despite the good year the ANZ share price has had, there have been some issues coming out recently that have been concerning. The company has been losing significant market share in the home loan market recently. While ANZ has always been a more business-focused bank compared with Commonwealth Bank or Westpac, it still isn't a good sign. ANZ has been closing physical branches at a higher rate than other banks as part of its digitalisation push, but it may have been an overreach judging by this trend.
As mentioned earlier, ANZ has not increased its dividend since 2015, and this is also a concern for me. But its $1.60 annual dividend represents a payout ratio of 71.4%, which isn't too high, so I'm also reasonably confident it is safe from any cuts in the near-term future. Therefore, I think ANZ shares would be a good stock to own for an income-focused portfolio, but not much else on today's prices.
