When we talk about the financial companies that dominate the Australian banking landscape, chances are most readers will think of at least one of the big four ASX bank shares.
Although there are dozens of players in the financial services sector, four names have historically commanded the lion's share of Australian deposits and loans. Those are, of course, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and ANZ Group Holdings Ltd (ASX: ANZ).
According to a 2024 report from Forbes, the big four's share of the banking market in Australia rose from around 50% in the 1980s to roughly 80% today.
However, despite the fact that the big four banks have historically offered large, fully franked dividends to their investors, only one of these four banks offers a dividend yield close to 5% today.
That sole outlier is ANZ.
Yep, at the $33.40 share price ANZ closed at yesterday, this bank stock was sitting on a trailing dividend yield of 4.97%. That is far higher than the next closest bank (in terms of yield), NAB. Its shares shut up shop on a yield of 4.08% yesterday. Westpac was even lower at 3.97%, while CBA continues to redefine what a major ASX bank can offer investors with its 2.85% yield.
So, with a clear lead amongst the big four when it comes to dividends, as well as a seemingly unimpeachable position of strength in the Australian financial landscape, are ANZ shares a buy for income today?
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Is Australian banking giant ANZ a buy for income today?
I would argue that ANZ is a prudent holding in the diversified portfolio of any ASX investor that seeks to maximise dividend income as a primary goal of their investing strategy. ANZ, like the other major banks, has funded fat dividend payments for decades, and I don't see any reason why this won't continue for well into the future.
Saying that, there are a few caveats that are worth mentioning.
Firstly, ANZ is the only major bank whose dividends no longer come with full franking credits attached. ANZ moved to partial dividend franking a few years ago, thanks in large part to its significant offshore operations. ANZ's income payments still do come with significant franking. To illustrate, its past two payments were partially franked at 70%. But even so, this will have implications for any income investors, so keep that in mind.
Secondly, there has been some ASX talk in recent months that ANZ might be cutting its dividend in the near future. Of course, we never know what a company's next dividend is going to look like until the day it is declared. There is never any obligation on a company to raise or maintain its dividends at a previous year's levels.
That may well happen at ANZ. Back in June, we looked at one ASX broker's view that the new ANZ CEO, Nuno Matos, may want to increase the bank's cash reserves, perhaps at the expense of shareholder dividends. That remains a live possibility.
It's highly unlikely, at least in my view, that ANZ would scrap its dividend entirely. But investors should note that today's 5% yield might not reflect what it will pay out over the coming 12 months and beyond.
