The big four ASX bank shares have long been held up as the dividend heavyweights of the Australian share market. And perhaps fair enough too. Amongst a list of ASX 200 blue chips over the past decade or two, the big four have consistently ranked as amongst the highest-yielding shares. That's with a brief hiatus during COVID-ravaged 2020.
But it's fairly safe to say that bank yields are more or less back to where they used to be. However, it still might come as a surprise to learn that the highest-yielding ASX bank share right now is none other than Australia and New Zealand Banking Group Ltd (ASX: ANZ).
Yes, ANZ currently has a dividend yield of 5.68%. Since ANZ's last few dividends have come with full franking credits too, this dividend grosses-up to an impressive 8.11%.
In contrast, Westpac Banking Corp (ASX: WBC) shares currently have a dividend yield of 5.38% on the table.
The National Australia Bank Ltd (ASX: NAB) share price offers a dividend yield of 4.41% at today's levels.
And Commonwealth Bank of Australia (ASX: CBA), the ASX's largest and most popular bank share, currently offers a dividend yield of 3.88%.
The difference between 5.38% and 3.88% is rather stark, especially by ASX bank standards. So why is ANZ such a good yielder right now?
Why is ANZ the highest yielding big four ASX bank share right now?
Well, it more or less comes down to how investors are pricing bank shares right now. When analysing different companies that all operate in the same sector and industry (such as ASX banks), the price-to-earnings (P/E) ratio is a very useful metric. It allows us to analyse how the market is pricing each bank relative to their respective earnings. A dollar of earnings has the same value, no matter if it is earned by ANZ or CBA.
So right now, CBA has a P/E ratio of 17.79. That means investors are paying $17.79 for every $1 of earnings the bank makes.
Westpac currently has a P/E ratio of 15.8. NAB is sitting at 15.11.
But ANZ is languishing at the bottom of the table with a P/E ratio of just 12.17. That means that investors are prepared to pay $17.79 for every dollar of CBA's earnings, but only $12.17 for every $1 of ANZ's.
We looked at some of the reasons why investors aren't too fond of ANZ shares right now earlier this month. But because of this fact, ANZ shares are right now cheaper on a P/E basis than any of the other big four banks. But cheaper share prices equate to higher dividend yields. That's because a dividend yield is calculated by dividing a share price by a company's dividends per share.
This is probably why the ANZ share price is currently offering the highest yield of the ASX 20 big four banks today.
