Is now the time to buy ANZ shares for dividend income?

How does a fully franked 6.6% dividend yield sound?

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A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price

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ANZ Group Holdings Ltd (ASX: ANZ) shares are tipped to pay an annual dividend of $1.62 per share in FY24, according to top broker Goldman Sachs.

Based on the current ANZ share price of $24.46, this will mean a dividend yield of 6.6%.

The broker has a buy rating on ANZ shares with a 12-month price target of $27.55.

So, there's a potential upside of 12.6% in terms of capital growth, too.

Is it time to buy?

ANZ shares to deliver a big dividend yield

Passive income investors love the ASX 200 bank stocks. They've long been known for paying strong dividend income year after year.

Not to mention the 100% franking that comes on top with most of the bank stocks.

Franking credits go a long way in reducing the tax investors have to pay.

They even deliver extra passive income to those retirees who receive their credits as a cash refund rather than a tax offset (if their income is lower than what their franking credits are worth).

In a recent article, we looked at various broker predictions as to what the ASX 200 bank stocks will pay in dividends in FY24.

We found that among the big four banks, ANZ shares would pay the second-highest passive income yield — just slightly behind Westpac Banking Corp (ASX: WBC) shares.

What's the latest news from ANZ?

ANZ released its 3Q FY23 update last week.

ANZ finished the period with a CET1 ratio of 13.5%, or 12.3% on a pro forma basis. ANZ's CET1 ratio excludes an approximate 56 basis-point (bps) impact from its interim dividend paid in July.

The bank reported continued growth in retail and institutional customer deposits in 3Q.

But it also revealed an increase in housing loans that are more than 90 days in arrears. Australian loans in this situation increased by 3 bps to 63 bps and New Zealand loans rose 8 bps to 53 bps.

Gross impaired assets as a percentage of total gross loans and advances increased from 17 to 18 bps.

The ANZ share price fell 0.93% on the day of the update.

What does Goldman say about ANZ shares?

ANZ shares have a 52-week low of $22.21, reached in September, and a 52-week high of $26.08, set in November.

Commenting after ANZ's 3Q update, Goldman Sachs said:

We remain Buy rated (on CL) on ANZ given: We have seen evidence of success for ANZ in improving the profitability of its Institutional business (the division's 1H23 PPOP RoRWA increased to 2.2%, from a 2H16 trough of 1.2%).

Coupled with current market competitive dynamics, which we would characterize as a relative tailwind for Institutional NIMs, vis-à-vis Retail, ANZ's business mix appears well-placed.

Motley Fool contributor Bronwyn Allen has positions in Anz Group and Westpac Banking Corporation. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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