Invest $20,000 in ANZ shares and get $1,200 in passive income

Can investors rely on ANZ for a 6% yield in their cash?

| More on:
A woman in hammock with headphones on enjoying life which symbolises passive income.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

We'd all like to see some extra passive income making its way into our pockets, I'd wager. After all, gaining a second income is at least one of the reasons many of us invest in ASX dividend shares in the first place. One of the most popular places to look for passive dividend income is from ASX bank shares like ANZ Group Holdings Ltd (ASX: ANZ).

Like its big four banking compatriots Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and of course Commonwealth Bank of Australia (ASX: CBA), ANZ shares have been notable for the decades of fat (and mostly fully franked) dividends that they have lavished on shareholders.

That continues into 2024.

On Friday, the ANZ share price closed at $28.95. At this pricing, the ASX 200 bank was sporting a trailing dividend yield of 6.04%.

A 6.04% yield is certainly nothing to turn one's nose up against. Not only does it beat the pants off what most other blue chip ASX 200 dividend shares are currently offering in terms of passive income, but it also leads the other three big four banks right now. It certainly looks a lot more compelling than CBA's rather unbanklike and paltry-by-comparison yield of under 4%.

At a yield of 6.04%, you could theoretically invest $20,000 into ANZ stock and receive $1,208 per annum every year in passive dividend income.

Plus, you'd get the benefits of some franking credits on top of that. As we discussed on Friday, ANZ can no longer be relied upon to fully frank every dividend payment, thanks to its partly international earnings base.

But ANZ's dividends still do come with some franking credits – the bank's last final dividend (paid out last December) was partially franked at 65%.

Can investors really expect $1,200 in passive income from $20,000 worth of ANZ shares?

However, there is one caveat to take into account in this rather rosy scenario: this all assumes ANZ's generous 2023 passive income will continue to flow going forward.

Sure, most ASX banks, including ANZ, have a pretty strong record of increasing their dividends over time.

But no ASX dividend share, whether it's a bank, miner, retailer or telco, has any kind of obligation to fund a dividend at the same rate as the one it paid out in a previous year. In fact, there is no obligation to pay a dividend at all (as was on display during the pandemic).

If ANZ maintains its 2023 dividends this year, then investors can indeed expect to receive $1,208 in passive income for every $20,000 invested. But if it doesn't, there's not much investors can do about it.

Even so, it arguably looks likely that ANZ will continue to fund generous ASX dividends for many years to come, judging by its long track record of doing just that.

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.

More on Dividend Investing

Smiling young parents with their daughter dream of success.
Dividend Investing

Top ASX dividend shares to buy in May 2024

Who could use a little extra cash right now?

Read more »

Smiling elderly couple looking at their superannuation account, symbolising retirement.
Dividend Investing

Looking to retire? Buy these ASX dividend shares for passive income

Analysts think these income stocks are in the buy zone right now.

Read more »

Man holding a calculator with Australian dollar notes, symbolising dividends.
Dividend Investing

What is the dividend yield of Wesfarmers shares?

Does Wesfarmers offer an appealing dividend yield right now?

Read more »

Four investors stand in a line holding cash fanned in their hands with thoughtful looks on their faces.
Dividend Investing

4 ASX All Ords shares with ex-dividend dates next week

Time's running out to get these latest ASX dividend payments...

Read more »

Two happy shoppers finding bargains amongst clothes on a store rack
Dividend Investing

2 high-yield ASX dividend shares to buy as they bounce

I rate these stocks as buys, they look cheap and they have high yields.

Read more »

Man holding out Australian dollar notes, symbolising dividends.
Dividend Investing

Guess which ASX dividends stocks analysts think are top buys

Analysts think these shares have decent upside potential and attractive yields.

Read more »

A woman in a hammock on her laptop and drinking a smoothie
Dividend Investing

$8,000 in savings? Here's how I'd aim to turn that into $1,151 in monthly passive income

Here’s how I’d go about investing in ASX dividend shares.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Dividend Investing

2 of the best ASX 200 dividend giants to buy in May

Brokers have named these stocks as their best ideas this month.

Read more »