Is the Australia and New Zealand Banking Group (ASX: ANZ) share price a buy for the 8% dividend yield?
It has been an extraordinary year for the big ASX bank. The ANZ share price is up 17% so far in 2019. It’s hard to believe we’re still in the same year that saw an end to the royal commission, leaving the big banks perhaps in a better position than when the RC started.
ANZ CEO Shayne Elliott has been in the news today, reported by the AFR, saying that he’s not sure if the big banks can remain the banking choice for every person and business all the time.
He was talking at the Intersekt fintech summit in Melbourne yesterday and mentioned in-particular how small businesses might be better off with different banks that can have a more active relationship.
Mr Elliott himself pointed how the return on equity (ROE) and net interest margins (NIMs) of banks has halved over the past 15 years.
Sure, the big banks produce huge profits, but in percentage terms they are nowhere near as profitable with higher capital requirements, the bank levy and higher competition.
I believe it’s only worth buying a bank if its earnings can foreseeably grow in the longer-term. Credit growth is the only thing that I can see pushing bank earnings higher over the next few years. The NIM is not likely to bounce back.
Indeed, Magellan Financial Group Ltd’s (ASX: MFG) Hamish Douglass has stated there isn’t a bank anywhere in the world that he would want to own. Not a great endorsement for ANZ!
Perhaps you’re not trying to create market-beating returns from ANZ. In which case, ANZ may well deliver decent dividends to your bank account over the next five years. But I can think of plenty of shares that offer good dividends and growth.
Like these high-quality ideas that have already created strong returns and big income over the last few years.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.