When an Australian investor buys an ASX bank stock, they are probably doing so with the expectation of receiving steady, fat and fully franked dividend payments. This reputation naturally applies to Westpac Banking Corp (ASX: WBC) shares.
Westpac is Australia's oldest bank and a prominent member of the big four ASX banks. As you would expect, this company has been delighting its investors with hefty dividend payments for decades.
But do Westpac's dividends still come with full franking credits attached? This might seem like a silly question. However, we've already seen one member of the big four banks club recently drop its commitment to paying fully franked dividends.
As we discussed last month, the culprit is ANZ Group Holdings Ltd (ASX: ANZ). ANZ shares have transitioned away from paying out fully franked dividends.
This bank's first partially franked dividend in decades was announced back in late 2019. Over subsequent years, ANZ's dividends returned to being fully franked alongside those from Westpac shares and the other banks.. until late 2023. At that time, ANZ revealed that its final dividend for 2023 would only come partially franked at 56%. That payment was doled out on 22 December.
Its next dividend, the final 83 cents per share payout that shareholders will receive on 1 July, is also set to come partially franked. This time at 65%. So it seems a new norm has been established for ANZ.
But what about Westpac shares?
Do the dividends from Westpac shares still come with full franking credits?
Fortunately for Westpac shareholders, it's a different story. All of the dividends this bank stock has paid out over the 21st century so far have come with full franking credits attached. Additionally, the bank has made no indication that it is planning on disrupting this status quo.
Earlier this month, Westpac revealed that its interim dividend for 2024 would come in at a fully franked 75 cents per share. That's a happy 7.14% increase over 2023's interim dividend of 70 cents (also fully franked).
Additionally, Westpac investors are also set to be treated to a supplemental special dividend. That's to be worth an additional 15 cents per share. This too will come with those full franking credits attached.
This makes sense because in order for a company like Westpac to pay out fully franked dividends, the profits that the dividends are funded from must be taxed in Australia.
ANZ, unlike Westpac and the other big four banks, has significant operations outside Australia. As such, these operations make it difficult for ANZ to pay out fully franked dividends.
But Westpac's business model is far more domesticated than ANZ's. As such, this bank probably won't struggle to keep its dividends fully franked going forward.
There's never any certainty in the investing (or dividend) world. But judging by Westpac's past dividend payouts, as well as its Australia-centric business model, the likelihood of Westpac's dividends remaining fully franked is arguably high.
At the current Westpac share price, this ASX 200 bank has a trailing dividend yield of 5.67% on the table. This grosses up to 8.1% with the value of those full franking credits included.
