Is the Australia and New Zealand Banking Group (ASX: ANZ) share price still a buy for dividends after the franking credit adjustment in its FY19 report?
The final dividend was still $0.80 per share, but the level of franking was reduced from 100% to 70%, so investors will receive less franking credits when they do their tax return.
ANZ CEO Shayne Elliot said the lower franking reflected the changed shape of its business.
The rest of ANZ's result wasn't very inspiring. Statutory profit after tax dropped 7%, continuing cash profit was flat and continuing cash earnings per share (EPS) rose 2% thanks to the share buyback.
Whilst the total impairment charge as a percent of average gross loan advances (GLAs) increased by 0.01% to 0.13%, there was a noticeable increase of Australian mortgages 90+ days past due.
The net interest margin (NIM) was also crunched down to 1.72% by the end of the second half, although the 'underlying' NIM only reduced to 1.75%.
Overall it was a pretty uninspiring report, although if you take the royal commission remediation out of it, the underlying profit numbers weren't terrible.
The franking credit change does essentially amount to a reduction of income for shareholders. But it's not surprising considering only 55% of FY19's statutory profit came from Australia. Around 16% of profit was generated from international sources and 29% from New Zealand.
Foolish takeaway
ANZ now has a partially franked dividend yield of 6%. The 3% fall in the share price has made up for the loss of income and it's now trading at under 12x FY20's estimated earnings.
I'm not a fan of the banks. There's a lot more attention, legal cases and remediation these days. I'd also avoid ANZ until its mortgage arrears stop rising, they could lead to higher bad debts.
