The S&P/ASX 200 Index (ASX: XJO) has been hovering around all time highs for the last month.
When the market is inflated, it can feel somewhat difficult to find value.
This can be a great time to turn our attention to stocks that offer strong dividends.
There are two Australian banks that may be ideal for investors looking for passive income.
Firstly, while ANZ Group Holdings Ltd (ASX: ANZ) is projected to pay a strong dividend in 2026, the short term could be volatile for share price as the bank deals with fallout from the ASIC penalty.
Furthermore, unlike other banking shares, ANZ has not traditionally paid fully franked dividends.
In fact, the two Australian banks I would consider for dividend growth are not part of the Big Four.
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Bank of Queensland Ltd (ASX: BOQ)
Bank of Queensland is one of Australia's largest regional banks still operating independently of the 'Big Four' banks.
The company offers home loans, personal finance, and commercial loans and operates both owner-managed and corporate branches.
Excluding 2020 (Covid) it has a consistent track record of paying strong dividends to investors.
At the time of writing, its yield is close to 5%, with forecasts for 2026 placing its yield well above CBA, NAB and Westpac.
A $5,000 investment would earn an investor hypothetically around $250 per year in passive income based on its current yield.
Bendigo and Adelaide Bank Ltd (ASX: BEN)
Located in Bendigo, Victoria, Bendigo and Adelaide Bank is a regionally focused bank.
The bank offers traditional retail banking services, but also provides unique banking options for agribusiness and rural properties.
In its FY 25 results, the board declared a final fully franked dividend of 33 cents per share, in line with last year's final Bendigo Bank dividend.
The bank has consistently paid a dividend of around 61-63 cents per share for the last three years, which offers some reassurance for investors.
With a yield hovering around 5%, it is well ahead of many of its peers.
Limited upside
It's worth noting that in general, ASX bank stocks have slumped after strong conditions in 2024/early 2025.
Amongst brokers, many bank stocks including BOQ and Bendigo and Bendigo and Adelaide bank are trading above price targets.
Therefore investors should be wary of expecting stock price growth as well as dividend payments in the short term.
