Is the Australia and New Zealand Banking Group (ASX: ANZ) share price a buy with everything that's going on with the coronavirus?
The ANZ share price has fallen by over 40% since the share market started declining. So clearly investors haven't been thinking it was good value until recently where it has started treading water.
The big question is how much will ANZ's earnings be hit? And how much will the dividend be cut? The ANZ share price could be a bigger mover if the dividend is cut altogether.
Westpac Banking Corp (ASX: WBC) has already announced some profit hits to its upcoming result. It's going to be a painful reporting season for all three big banks that are reporting.
Today National Australia Bank Ltd (ASX: NAB) announced a capital raising for $3.5 billion and it will reduce the interim dividend to 30 cents per share, a decrease of 64%.
If ANZ reduced its dividend by 64% it would be reduced to around 29 cents per share, equating to an annualised grossed-up dividend yield of 5.2% at today's price. But it's a pretty disappointing yield for longer-term income investors with a higher cost base.
There's a chance that ANZ's dividend could be reduced further. ANZ earns more of its money outside of Australia than other major banks. The Reserve Bank of New Zealand (RBNZ) has suspended dividend payments for now. But that could help ANZ growth over the medium-term.
Is the ANZ share price a buy?
We don't know how long the coronavirus is going to be a dark cloud over Australia or the rest of the world. Therefore, we don't know how much economic damage there's going to be. We don't know how fast the economy will be able to get back to normal.
Investing in a high-risk business amid the uncertainty isn't my type of play. If there's a V-shaped recovery then ANZ may be cheap. However, it might be worth noting that before the coronavirus declines the Bank of America share price hadn't recovered to its pre-GFC highs. Despite the huge recovery last decade.
