I think that Macquarie Group Ltd (ASX: MQG) could be the best ASX bank to buy for dividends.
It currently has a partially franked dividend yield of 4.4%.
There are plenty of banks on the ASX to compare against including Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), Bank of Queensland Limited (ASX: BOQ) and Bendigo and Adelaide Bank Ltd (ASX: BEN).
Looking at Macquarie’s results between 2010 and 2020, I see long-term and consistent growth of both the earnings and dividends. Whereas our local banks have struggled to grow earnings in the past few years and the dividends haven’t gone anywhere – indeed some bank dividends have gone backwards.
I don’t think there’s much to like about a business that is going backwards. Just look at what happened during the royal commission into financial services. Macquarie flew through it without much fuss, yet its competitors’ reputations have been trashed. I think that shows the quality organisation that Macquarie is.
One of the one things that attracts me to Macquarie is that it operates as a global investment bank with two thirds of its earnings generated from across the world. It can expand anywhere it thinks is a good opportunity globally. The domestic banks seem to doubling down on the domestic mortgage market. With the housing market turning around this might not be a bad thing, but it’s putting all their eggs in one basket.
Macquarie has demonstrated over the last decade how powerful a diverse product and geographical strategy can be.
Macquarie has a tendency to under promise and over deliver, so its prediction of lower earnings in FY20 may not even happen. Over the next decade I think Macquarie will generate the best returns again compared to the other banks even if it doesn’t have the biggest yield.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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.