Is the Australian and New Zealand Banking Group (ASX: ANZ) share price a buy for dividends with the ongoing coronavirus?
How will banks be affected in all of this? Well, the ANZ share price is down another 1.8% today. Since the start of the week the ANZ share price has fallen by almost 4%, so it's not down as much as many other shares – some are down more than 4% today alone.
Blue chips tend to fall less than some of the smaller, faster-growing businesses. Banks are not like travel businesses or companies relying on supply chains. A traveller may decide to delay their travel, or not travel at all. Whereas borrowers have to keep paying the bank on time until the end of the loan.
In some ways you could say that a bank's net interest income is actually quite defensive.
However, the question will be if ANZ's bad debts will jump if coronavirus disruptions were to cause a hit to borrower's earnings and therefore they may be unable to make payments to ANZ on time.
So far the coronavirus has not heavily affected Australia within its own borders, though some companies have warned of supply chain problems and potential lower earnings in FY20.
ANZ's FY19 result was not exactly amazing. It reported statutory net profit was down 7% to $5.95 billion and cash profit was flat at $6.47 billion. The dividend per share was flat at $1.60 per share, though the franking was reduced to 70%. We'll have to see what happens with ANZ's FY20 result.
Foolish takeaway
Based on the current share price and an expectation of franking remaining at around 70%, ANZ has a grossed-up dividend yield of almost 8%. In today's low interest environment this looks appealing on the surface, but the issues of higher capital requirements and low growth remain. I'd rather buy shares of businesses with attractive long-term growth outlooks.
