Are the dividends from Macquarie Group Ltd (ASX: MQG) shares going to beat a savings account here as we stand in September 2022?
That is a very good question. For years now, dividends were almost always going to give an investor a higher yield than what could be achieved through a savings account. That's what record low interest rates, which got down to a paltry 0.1%, result in.
But in 2022, times have changed, and rapidly at that. This week saw the Reserve Bank of Australia (RBA) increase the cash rate for the fifth consecutive month in a row. The cash rate was 0.1% at the start of the year. Now it stands at 2.35%. That changes the game when it comes to cash investments like savings accounts and term deposits.
So let's circle to the Macquarie dividend. July saw Macquarie fork out its last dividend, a final payment worth $1.40 a share. Unusually for Macquarie, this came fully franked. This was a substantial drawdown from FY21's final dividend. This was worth a whopping $3.35 per share, partially franked at 40%.
Together with Macquarie's December interim dividend of $2.72 per share (also partially franked at 40%), Macquarie shares today have a dividend yield of 3.49%.
So how does this dividend yield compare to what an investor can expect from a savings account or term deposit today?
How do Macquarie's dividends stack up to cash today?
Well, it's certainly competitive. As we covered earlier this week, the highest savings accounts in Australia currently offer interest rates of just over 3%. The highest of these is presently 3.6%.
Saying that, accounts offering these kinds of interest rates usually come with conditions. These include minimum transaction thresholds, regular deposits, and requirements that no funds are withdrawn if investors are to receive the top rates.
When it comes to term deposits, higher rates still are available to investors. If savers are willing to lock their money away for more than 12 months, rates up to 4.4% are currently available. Macquarie's own term deposits currently go up to a maximum interest rate of 3.65%. That's slightly above its present dividend yield.
Something else to consider as well. Rates have just been hiked by another 0.5% as of this week. As is often the case with the ASX banks, this latest hike has yet to fully flow through to banks' savings products.
So even if the RBA doesn't raise rates next month, we could see even higher rates still on Australian savings accounts and term deposits in the next few weeks and months.
For years, dividends had the upper hand on cash investments. But it looks like the tide may finally be turning.
