Is the Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price a buy right now for dividends?
What's the latest from ANZ?
Last month, the big bank released its update for the first quarter of FY21. It announced an unaudited statutory profit after tax for the quarter to 31 December 2020 of $1.62 billion, with an unaudited cash profit from continuing operations of $1.81 billion – up 54% on the average of the last two quarters of 2020.
ANZ reported that its credit impairment charge was a release of $150 million, compared to a quarterly average impairment charge of $531 million in the second half of FY20 and $827 million in the first half of FY20 (due to COVID-19 impacts).
However, ANZ said that its profit before credit impairments and tax was $2.4 billion in the first quarter of FY21. This was actually lower than the quarterly average in the second half of FY20 ($2.52 billion) and also lower than the first half of FY20 ($2.51 billion).
ANZ's common equity tier 1 (CET1) capital ratio has been steadily climbing. At December 2020, the CET1 ratio was 11.7%, at September 2020 it was 11.3% and at March 2020 it was 10.8%. It's this level of capital that's getting the market excited about potential dividends in the next couple of results.
How has the ANZ share price performed recently?
The big banks have been some of the stronger performers on the ASX in recent times.
Over the last six months the ANZ share price has gone up by 62% and over the last month it has risen by 14.5%. The market seemed to like the update and investors have priced the bank higher for a recovery in earnings.
ANZ CEO Shayne Elliot himself said:
This is a strong performance in volatile trading conditions that again highlights the benefits of disciplined execution of our strategy as well as maintaining a simpler and well balanced portfolio of businesses.
Margins were up across the group due to higher volume growth in targeted segments and disciplined and active approach to risk and pricing. The combination drove group revenue up 4% for the quarter when excluding the impact of our markets business.
The small release in the collective provision reflected improved economic conditions, particularly here in Australia. However, recent lockdowns in Perth, Brisbane, Melbourne and Auckland demonstrate how quickly things can change and we believe our current settings are both prudent and appropriate given this uncertainty.
What about dividend expectations?
ANZ's dividend decision will be left to the FY21 first half result, but some brokers have pencilled in some expectations about what the dividend size will be for the full 2021 financial year.
For example, broker Ord Minnett thinks that the ANZ FY21 dividend could be $1.40 per share, which amounts to a grossed-up dividend yield of 7% at the current ANZ share price.
Broker Credit Suisse has expectations of a FY21 annual dividend of $1.48 per share for ANZ, equating to a grossed-up dividend yield of 7.4%.
Morgan Stanley has pretty low expectations for the FY21 dividend from ANZ – the broker is expecting a dividend payout of $1.05 per share. This translates to a forward grossed-up dividend yield of 5.25%.
