The banking sector has been in fine form this year and was a key reason the S&P/ASX 200 Index (ASX: XJO) recently reached a new high.
The good news for investors is that it doesn't appear to be too late to buy the big four banks for income. Even after their strong gains in 2021, they are still forecast to provide investors with generous yields over the next couple of years.
Two highly rated ASX bank shares to look at are listed below. Here's what income investors need to know about them:
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Australia and New Zealand Banking GrpLtd (ASX: ANZ)
Last week ANZ released its half year results and revealed a statutory profit after tax of $2,943 million and cash earnings from continuing operations of $2,990 million. This was up 45% and 28%, respectively, on the second half of FY 2020.
This return to form allowed the ANZ board to declare a fully franked interim dividend of 70 cents per share.
Pleasingly, analysts at Morgans are expecting more of the same in the second half and in FY 2022. According to the note, the broker is forecasting fully franked dividends per share of 145 cents and 163 cents in FY 2021 and FY 2022, respectively.
Based on the current ANZ share price, this will mean yields of 5.3% and 6%. Morgans has an add rating and $34.50 price target on its shares.
Westpac Banking Corp (ASX: WBC)
Westpac was also a strong performer during the first half. For the six months ended 31 March, the bank reported cash earnings of $3,537 million. This was a 256% increase over the prior corresponding period and a 119% lift over the second half of FY 2020.
This allowed the Westpac board to declare a fully franked interim dividend of 58 cents per share.
Morgan Stanley was pleased with its result and retained its overweight rating and lifted its price target to $29.20. It also revealed that it now expects Westpac to pay fully franked dividends per share of $1.18 and $1.25 over the next two years.
Based on the latest Westpac share price, this will mean yields of 4.7% and 5%.
