Is the Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price worth buying for its dividend yield?
A lot of investors do think that ANZ shares are a buy. Since 7 February 2022, ANZ has risen by 6%.
How big is the dividend going to be at the current ANZ share price?
The bank is expected to pay a sizeable annual dividend in FY22. Commsec numbers imply that the grossed-up dividend yield will be 7.3%.
Some analysts have very similar dividend expectations. Morgan Stanley also reckons that ANZ will pay a grossed-up dividend yield of 7.3%. Ord Minnett also believes that ANZ will pay a grossed-up dividend yield of 7.3%.
One of the biggest estimates of the dividend from ANZ is from Citi – the grossed-up dividend yield could be 7.8%.
So, lots of estimates for the ANZ dividend yield are somewhere in the 7s.
Latest performance
Investors often like to judge the ANZ share price on the latest comments regarding profit and performance. For ANZ, it gave a market update on 7 February 2022 for the three months to 31 December 2022.
ANZ said that the group net interest margin (NIM) was down 8 basis points for the quarter, with the underlying NIM down 5 basis points. It blamed this on structural headwinds impacting the sector.
But there may be good news ahead – the impact of rising rates, predominately in New Zealand, and recent deposit pricing changes are expected to moderate the ongoing headwinds in the second quarter.
The big four ASX bank also said that it has made solid progress in Australia to improve systems and processes for simple home loans with application times now in line with other major lenders. Last year, ANZ lost market share which is partly blamed on extended loan processing times. Efforts continue to improve response times for more complex home loan applications.
The Australian home loans balance sheet grew slightly in the first quarter of FY22. Managing attrition and margins is a key area of focus because of the high levels of refinancing activity in the sector.
Revenue within the ANZ markets business was soft in October, but performed in line in subsequent months.
'Run-the-bank' costs are expected to be broadly flat in the first half.
The credit quality environment has remained benign with a total provision release of $44 million during the quarter.
ANZ said its capital position continues to provide flexibility to return further surplus capital to shareholders and ANZ is considering increasing the size of the current on-market buy-back.
Is the ANZ share price a buy?
Morgan Stanley rates it as a buy, with a price target of $30. The NIM drop was a bigger decline in the latest quarter than what the broker had been expecting. But a recovery of margins, as indicated by ANZ, would be helpful.
Ord Minnett rates it as a buy, with a price target of $30.50. It sees revenue growth for ANZ. The broker prefers ANZ to Westpac Banking Corp (ASX: WBC).
However, the broker with the biggest dividend estimate, Citi, is only 'neutral' on the bank with a price target of $29.25.
