ASX bank shares are often popular among dividend-oriented investors.
They have historically paid relatively reliable and attractive dividends.
Their large, established businesses generate recurring profits from lending, deposits and other financial services, which can support regular dividend payments.
The banks also have strong market positions in Australia and are subject to capital and regulatory requirements that can provide investors with some confidence in their financial stability.
As a result, big four bank shares are often viewed as a way to generate income while also providing the potential for long-term capital growth, although dividends are not guaranteed and bank share prices can fluctuate with economic and interest-rate conditions.
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What are the current yields for the big four bank shares?
At the time of writing, the big four banks are offering the following yields:
- Commonwealth Bank of Australia (ASX: CBA) offers around 2.8% yield
- ANZ Group Holdings Ltd (ASX: ANZ) is offering a 4.4% yield
- National Australia Bank Ltd (ASX: NAB) offers a 4% yield
- Westpac Banking Corp (ASX: WBC) also offers a 4% yield.
These yields do not include the benefit of franking credits, which are tax credits attached to dividends that represent tax already paid by the company and can reduce an investor's tax liability (or potentially result in a refund for eligible investors).
How much passive income could you earn in a year off $10,000?
Based on the yields above, investing $10,000 in each of the big four banks could generate roughly $280 to $440 a year in dividend income, depending on which bank you choose.
CBA's 2.8% yield would provide around $280 per year, while ANZ's 4.4% yield would provide about $440, with NAB and Westpac at 4% providing approximately $400 each.
These figures are before tax and exclude any benefit from franking credits, which could increase the effective income for eligible Australian investors.
Looking outside the big four
While the big four banks will always be popular choices amongst income investors, there is also another bank stock worth considering.
Bank of Queensland Ltd (ASX: BOQ) recently announced a special dividend of 15 cents per share.
Based on the current share price, this puts its yield at over 6%.
This means if you invested $10,000 in Bank of Queensland at a 6% dividend yield, you would receive approximately $600 in dividend payments per year.
