The current ANZ Group Holdings Ltd (ASX: ANZ) share price is low enough that it could offer an exceptionally high dividend yield.
The ASX dividend share has seen a 12% fall since 9 February 2023.
When a share price falls 10%, it boosts the dividend yield by 10%. For example, if the dividend yield used to be 9%, and the share price falls 10%, then the dividend yield becomes 9.9%.
First, let's look at how much passive income ANZ shares are expected to pay out in FY23.
Dividend projection
The dividend forecast on Commsec suggests that ANZ shares could pay an annual dividend per share of $1.60 in the 2023 financial year.
At the current ANZ share price, this projected dividend could equate to a grossed-up dividend yield of 10% in FY23.
In fact, Commsec numbers are suggesting that the dividend could increase further in FY24 to $1.64 per share and rise again in FY25 to $1.65 per share.
Those predictions mean that the ANZ grossed-up dividend yield could be 10.3% in FY24 and 10.4% in FY25.
So, a double-digit yield is projected for this financial year and the following two financial years.
Is this a good time to buy ANZ shares?
For investors that want to buy ANZ shares, then this is one of the better times of the last 52 weeks to consider buying shares. It has been a lot higher than today over the last year.
There is a lot of volatility going on in the global share market, particularly with banks.
I'm not an expert on the banking problems in the northern hemisphere, but I think the recent examples of Silicon Valley Bank and Credit Suisse have shown how quickly things can go wrong.
I don't believe ANZ, or any of the S&P/ASX 200 Index (ASX: XJO) bank shares, are as vulnerable because Australian banks are well-capitalised. They were strong during the COVID-19 period and that seems to be continuing.
The ASX bank share revealed that at 31 December 2022, its common equity tier 1 (CET1) ratio was 12.2%.
It also revealed that its credit quality was good. Looking at the loans that were at least 90 days past due, as a percentage of the overall portfolio, it "continued to reduce" – there was a drop in arrears of the Australian housing portfolio, down 3 basis points to 55 basis points in the first quarter of FY23.
ANZ also reported a $7 billion increase in Australian net loans and advances over the three months to 31 December 2022. It also saw that all divisions experienced an increase in customer deposits, including increased flows into term deposits.
The ASX bank share is also benefiting from higher interest rates because its boosting ANZ's lending margins.
However, this may be the best it gets in terms of operating conditions. I think arrears are going to increase as a result of the much higher interest rates. There may also be the potential for lending competition to lower the sector's lending margins again.
My conclusion on the ANZ share price
I don't think it's going to get much better for ANZ's earnings from here. I'm not sure there's going to be much benefit from the Suncorp Group Ltd (ASX: SUN) banking acquisition in per-share terms. I think it could be a distraction for management.
ANZ shares could offer very large dividend income because it's only valued at 9 times FY23's estimated earnings, according to Commsecs. But, I wouldn't expect much profit growth in FY24 or FY25 compared to FY23. It looks cheap, and it may benefit from a valuation boost from this low level. But I think there are other ASX dividend shares that could achieve stronger long-term growth.
