It's great news for investors after the bank's share price fluctuated over the past month as the market adjusted to a new market normal. Throughout March ANZ's share price fell 8.5%.

Despite ongoing global uncertainty, cash rate hikes, and a slowdown in lending, the banking giant's shares are now up 2.3% for the year-to-date and 39% above their trading levels this time last year. 

For context, the S&P/ASX 200 Index (ASX: XJO) is practically flat for the year-to-date, and 18.9% higher than 12 months ago.

Despite interest rate headwinds and broad under-certainty across the ASX financial sector, I still think ANZ shares are a great buy.

Here are three reasons why.

1. ANZ has stable earnings and a predictable cash flow

ANZ is generally considered to have stable earnings and predictable cash flow. This is due to its position as one of Australia's big four banks. The bank has a strong deposit base and a diversified portfolio that means it is relatively defensive in nature.

In mid-February, ANZ posted a first-quarter cash profit of $1.94 billion, up a whopping 75% from the second-half average of FY25. Operating income was up 4% and cash return on tangible equity climbed 11.7% over the quarter.

The news beat expectations, delighted investors and instilled some renewed confidence into the stock. ANZ shares closed at an all-time high following the announcement.

2. It pays a regular dividend to shareholders

ANZ traditionally makes dividend payments to shareholders every six months, payable in July and December. It also offers both a dividend reinvestment plan (DRP) and a bonus option plan (BOP) as alternatives to receiving cash dividends on ANZ ordinary shares.

The bank's most recent dividend was paid out to shareholders in December. It paid 83 cents per share franked at 70%. This brought the total annual dividend to $1.66 per share, at a yield of 4.45%. UBS brokers are projecting a similar payout from ANZ in FY27, resulting in a dividend yield of 4.2% (excluding franking credits).

3. It has a better share price outlook versus some of its peers

Brokers are neutral on the outlook for ANZ shares over the next 12 months. Most have a hold rating with an average target price of $38.01, which implies a potential 2% upside at the time of writing. 

Therefore, ANZ has a better share price outlook than its big four bank peers. Brokers hold a strong sell rating on Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corporation Ltd (ASX: WBC) with a 25% and 11% downside respectively.

Brokers have a neutral rating on National Australia Bank Ltd (ASX: NAB) shares but with a smaller 0.08% average upside. 

The post 3 reasons to buy ANZ shares today appeared first on The Motley Fool Australia.

But does the broker think they are buys, holds, or sells? Let's see what it is saying about them:

Cochlear Ltd (ASX: COH)

This hearing solutions company delivered a result that was below expectations during the first half of FY 2026.

And while the broker notes that demand for the new Nucleus Nexa system is increasing, it isn't enough for a buy rating at this point. It has put a hold rating and $214.93 price target on its shares. However, this is comfortably ahead of the current Cochlear share price of $172.36. It said:

The 1H26 result was softer than expected, with revenue, margins and profit negatively impacted mainly on longer than anticipated contracting for the newly launched Nucleus Nexa system (Nexa). Soft Cochlear Implants (CI) growth mis-matched sales, reflecting unfavourable emerging market mix and delayed developed market momentum, while Services was flat and Acoustics surprised to downside on increased competitive pressures.

While Nexa adoption accelerated late in the half and management maintained FY26 guidance, but now is targeting the lower end of the range, it increases reliance on a strong 2H recovery which appears optimistic, especially in light of flat GM and FX headwinds. We adjust our FY26-28 estimates and lower our target price to A$214.93. We maintain a cautious stance, but move to HOLD on share weakness.

South32 Ltd (ASX: S32)

Unlike Cochlear, this mining giant outperformed expectations during the first half.

While Morgans was impressed with its result, due to its current valuation, it has lowered its rating to accumulate with a $5.00 price target. This compares to the latest South32 share price of $4.42. It said:

Bumper 1H26 EBITDA comfortably ahead of consensus and close to our estimate, riding consistent production and higher base and precious metals. 15% interim dividend beat and upsized capital management of an extra US$100m. Not all positive, Hermosa budget increase flagged for H2 a ST risk to monitor. Guidance unchanged, besides Brazil Aluminium output and capex timing tweaks.

We lower our rating to ACCUMULATE (from BUY) with an unchanged A$5.00 TP, recommending patience when adding following the recent share price surge.

Westpac Banking Corp (ASX: WBC)

Finally, Morgans has been looking at Westpac shares following its first-quarter update.

Although the broker was pleased with the update, it has only been enough to upgrade its shares to a trim rating (between sell and hold) with a $35.12 price target. This compares to the latest Westpac share price of $39.85. It said:

A largely stable 1Q26 result compared to the 2H25 quarterly average (normalised for 2H25's restructuring charge), which is better than 1H26 expectations. We are assuming a more bullish loan growth and impairments outlook than previously (and slightly more conservative costs).

There is no change to FY26F EPS but there are 5-8% upgrades to FY27-28F. Target price lifts to $35.12/sh. We upgrade to TRIM given the improved, but still negative, potential TSR.

The post Buy, hold, sell: Cochlear, South32, and Westpac shares appeared first on The Motley Fool Australia.

March was a difficult month for most stocks following the onset of the Iran war at the end of February.

The resulting conflict in the Middle East saw the Brent crude oil price spike 48% over the month just past, soaring from US$72.50 on 27 February to US$107.50 on 31 March, according to data from Bloomberg.

That's likely to push inflation significantly higher over the coming months, which in turn could pressure global central banks, including the Reserve Bank of Australia, into raising interest rates.

As you're likely aware, the RBA already has hiked the official cash rate twice this year. The second interest rate rise was delivered on 17 March, with the 0.25% lift taking the benchmark rate to 4.10%.

Higher interest rates have the potential to support ASX 200 bank stocks by enabling a larger net interest margin (NIM). But if higher rates and rising inflation lead to a broader economic downturn in Australia, the banks – among other headwinds – could get hit with a material increase in non-performing loans.

With that picture in mind…

ASX 200 bank stocks retreat in March

Commonwealth Bank of Australia (ASX: CBA) was the best performing big bank stock last month.

CBA shares closed out February trading for $174.62 and finished March at $167.70 each. That put the CBA share price down 4.0% in March, significantly outperforming the 7.8% loss posted by the benchmark index.

Westpac Banking Corp (ASX: WBC) shares also outperformed the benchmark.

Barely.

Shares in the ASX 200 bank stock closed on 27 February trading for $42.54. When the closing bell sounded on 31 March, shares were changing hands for $39.47 apiece. This saw Westpac shares down 7.2% over the month.

That was a better performance than we saw from ANZ Group Holdings Ltd (ASX: ANZ).

ANZ shares ended February at $40.04 and closed out March trading for $35.97. The 10.2% decline in ANZ shares over the month underperformed the benchmark.

Which brings us to March's laggard, National Australia Bank Ltd (ASX: NAB).

NAB shares closed out February trading for $49.02. On 31 March, shares ended the day changing hands for $41.44. That saw the NAB share price down 15.5% over the month, or almost twice the losses posted by the benchmark index.

Taking a step back

While March saw the big four ASX 200 bank stocks take a tumble, investors who bought any of the banks a year ago will still be sitting on some benchmark beating gains.

Here's how they've performed (as at time of writing today) over the past 12 months, not including dividends:

• NAB shares are up 21.6%
• CBA shares are up 11.0%
• Westpac shares are up 25.6%
• ANZ shares are up 22.6%

The post What happened with ASX 200 bank stocks like CBA and Westpac in March? appeared first on The Motley Fool Australia.

Westpac Banking Corporation (ASX: WBC) now believes the central bank could raise the official cash rate three more times over the next few months, with expected increases in May, June, and August.

If that happens, the cash rate would climb to 4.85%, which would be a major jump from where it sits today.

The big reason is the recent surge in oil prices, which is now starting to push up costs right across the economy.

That is why economists now think the RBA may need to lift rates more than once from here.

Westpac now expects several rate hikes

The biggest change in Westpac's view is that it no longer sees this as a one-off rate rise.

Chief economist Luci Ellis has lifted her forecast from one hike to three, saying the jump in fuel prices is spreading much faster than expected.

At first, higher oil prices mainly show up at the petrol pump.

The bigger issue is how those costs spread through other industries.

More expensive fuel also means higher transport costs, rising freight bills, more expensive flights, and bigger costs for businesses that rely on plastics, packaging, and manufacturing.

Those higher costs often end up being passed on to customers through higher prices.

That is what worries the RBA.

If price increases start spreading through lots of parts of the economy, inflation becomes much harder to bring back under control.

That could force the central bank to keep lifting rates.

Why rising oil prices are becoming a bigger inflation issue

The main issue is the ongoing disruption around the Strait of Hormuz, which remains one of the world's most important oil shipping routes.

Because the supply problems are lasting longer than first expected, oil prices have stayed high.

That is now starting to affect much more than just petrol prices.

While the government's fuel excise cut may help drivers a little, it does not reduce higher costs for airlines, freight companies, manufacturers, and many businesses that use oil-based products.

That means inflation could rise again in the June quarter.

Westpac now expects inflation to reach 5.4%, which is far above the RBA's target range.

If that happens, the central bank may decide it has no choice but to keep raising interest rates until price pressures start easing.

Foolish takeaway

Westpac's new forecast suggests the next rate rise may not be the end of the story.

Instead, the RBA may need to keep tightening policy if higher oil prices continue flowing through to everyday goods and services.

For households, that would mean more pressure on mortgage repayments and less room in family budgets.

Further increases would also add pressure to consumer spending, retailers, and other interest-rate-sensitive ASX sectors.

At this point, the interest rate outlook has become one of the market's main concerns this year.

The post Westpac warns the RBA may need to hike rates again appeared first on The Motley Fool Australia.

That's not hard to understand. The big four have historically generated strong profits, paid out a large portion of earnings as dividends, and offered franking credits that can boost after-tax returns for local investors.

For many portfolios, bank shares have been a reliable source of income.

However, it's worth noting that the sector's strong share price performance over the past couple of years has had an impact. As share prices rise, dividend yields naturally compress, which means investors today are generally getting lower yields than they might have a few years ago.

With that in mind, let's take a look at how the major banks stack up right now based on consensus estimates according to CommSec.

Commonwealth Bank of Australia (ASX: CBA)

CBA shares ended yesterday's session at $173.18.

Consensus estimates currently predict fully franked dividends of $5.20 per share in FY26 and $5.50 per share in FY27 from Australia's largest bank. That equates to dividend yields of around 3.0% for FY26 and 3.2% for FY27.

While that is the lowest yield among the big four, it reflects the bank's premium valuation. Investors have historically been willing to accept a lower yield in exchange for what many consider to be the highest-quality banking franchise in Australia.

National Australia Bank Ltd (ASX: NAB)

NAB shares were trading at $42.56 at Thursday's close.

CommSec's consensus estimates point to fully franked dividends of $1.76 per share in FY26 and $1.82 per share in FY27. This implies dividend yields of approximately 4.1% and 4.3%, respectively.

That places NAB in the middle of the pack.

Westpac Banking Corp (ASX: WBC)

Westpac shares last traded at $40.46.

The bank is expected to pay fully franked dividends of $1.56 per share in FY26 and $1.60 per share in FY27. Based on those estimates, Westpac offers dividend yields of roughly 3.9% for FY26 and 4.0% for FY27.

Like NAB, this positions it as a relatively solid income option, though not the highest in the group.

ANZ Group Holdings Ltd (ASX: ANZ)

Finally, ANZ shares last traded at $36.65.

According to CommSec, the bank is expected to pay partially franked dividends of $1.68 per share in FY26 and $1.72 per share in FY27. That puts its forward dividend yield at roughly 4.6% for FY26 and 4.7% for FY27.

The partial franking is worth keeping in mind, as it can affect after-tax income compared to fully franked alternatives.

ANZ is the ASX bank with the biggest dividend yield

Based on current consensus estimates, ANZ offers the highest forecast dividend yield among the big four banks.

However, the difference is not especially large, and it comes with the trade-off of only partial franking.

Foolish takeaway

ANZ may currently offer the highest forecast yield, but its partial franking means the after-tax outcome may not be as straightforward when compared to fully franked alternatives like CBA, NAB, and Westpac. At the same time, CBA's lower yield reflects the premium the market places on its quality and consistency.

In my view, the banks can still provide attractive and relatively reliable income, but the best choice will depend on whether you prioritise yield, franking, or overall business quality.

The post Which ASX bank has the biggest dividend yield? appeared first on The Motley Fool Australia.

At the time of writing, the banking giant's shares are up 1% to $40.83.

Why are Westpac shares rising today?

The catalyst for today's move appears to be the release of an update on the bank's UNITE transformation program.

According to the update, Westpac has made solid progress on the large-scale simplification strategy, which is designed to improve customer experience, reduce costs, and lift returns.

Management notes that the program remains on track, with no changes to its overall scope, timeline, or budget since its FY 2025 results.

What is the UNITE strategy?

UNITE is Westpac's major transformation program aimed at simplifying its operations across technology, products, and processes.

The bank revealed that it has already decommissioned more than 180 applications, reduced its product set by over 70%, and simplified more than 700 processes.

Management believes this will lead to a more consistent experience for both customers and employees, while also helping to close the cost-to-income gap with peers.

Strong progress across key initiatives

Westpac highlighted a number of milestones achieved so far.

These include the rollout of its Digital Banker platform to all bankers, consolidation of systems such as its chat platform, and the completion of its wealth platform migration to Panorama.

The company also confirmed that program discovery is now complete, with 57 initiatives identified and currently being delivered through 10 work packages.

At present, eight initiatives have been completed, with 49 remaining in progress.

Investment and benefits

Westpac revealed that it invested $195 million into the UNITE program during the first quarter of FY 2026, with approximately 73% of that amount expensed.

The broader program is expected to involve significant investment, with around 40% of total spend forecast to occur across FY 2027 and FY 2028.

Importantly, management continues to point to meaningful long-term benefits, including reduced operational complexity, improved productivity, and stronger shareholder returns.

Outlook

Looking ahead, Westpac has outlined a series of key milestones for the second half of FY 2026.

These include further progress on mortgage simplification, continued rollout of its Digital Banker capabilities, and advancement of its One Commercial Bank initiative.

Following today's move, Westpac shares are now up an impressive 30% over the past 12 months.

The post Westpac shares are climbing following UNITE update appeared first on The Motley Fool Australia.

The Reserve Bank raised the official cash rate by 25 basis points to 4.10% this month, marking the second consecutive increase in 2026. The bank cited persistent inflationary pressures and a tight labour market for the increase. 

Now the experts are warning that Australia's inflation rate could keep climbing, and major banks widely predict another cash rate increase in May. 

What's the latest out of ASX bank stocks?

The Australian share market is dominated by the big 4 major banks. Together, the majors – Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), and ANZ Group Holdings Ltd (ASX: ANZ) – make up around a quarter of the S&P/ASX 200 Index (ASX: XJO) by market capitalisation.

Then there are the smaller players, Macquarie Group Ltd (ASX: MQG), Bank of Queensland Ltd (ASX: BOQ), Bendigo and Adelaide Bank Ltd (ASX: BEN), and Judo Capital Holdings Ltd (ASX: JDO). 

At the time of writing on Wednesday morning, CBA shares are up 1% to $172.86; Westpac shares are up 1.3% to $40.25; NAB shares are up 1.4% to $40.31; and ANZ shares are up 1.3% to $36.93.

Over the month, the major bank shares are down 3%, 6.2%, 11.8%, and 7%, respectively.

Outside of the majors, Macquarie shares are 1.9% higher at the time of writing to $198.71; BOQ shares are 1% higher at $6.83 a piece; Bendigo shares are 0.6% higher at $10.11 each; and Judo shares have climbed 0.3% to $1.48.

Over the month, the smaller bank shares are down 4%, 2%, 6.5%, and 14%, respectively.

Which ASX bank stocks are a buy?

Analysts are the most optimistic about the outlook for Judo Bank shares. It's the only ASX bank stock where analysts mostly hold a strong buy rating. Its average target price is $2.25, which implies a huge 51% upside at the time of writing. Although some think this could jump even higher, by up to 68% to $2.50 per share.

Sentiment on the outlook for Macquarie shares is mostly very positive. Most analysts have a buy or strong buy rating on the bank's shares. The average $238.28 target price implies the shares could jump 21% from here.

Which ASX bank stocks are a hold?

Analysts are undecided about the outlook for NAB shares, with sentiment mostly for a hold rating. The average target price is $43.90, which implies a potential 1.88% downside at the time of writing.

Brokers are also neutral on the outlook for ANZ shares over the next 12 months. Most have a hold rating with an average target price of $35.56, which implies a potential 0.3% downside at the time of writing.

Sentiment is also neutral on BOQ shares, with data showing most analysts have a hold rating on the stock. However, the average $6.37 target price implies a potential 6.5% downside at the time of writing.

Analysts also mostly have a hold rating on Bendigo shares. Although its average target price of $10.41 implies a 3% upside at the time of writing.

Which ASX bank stocks are a sell?

Sentiment is that CBA shares are overpriced and out of keeping with the company's fundamentals. Most analysts have a sell or strong sell rating on CBA shares and are tipping an average downside of 23% to $133.85 a piece over the next 12 months, at the time of writing.

Westpac is also expected to have limited growth over the next few years. Most analysts also have a sell or strong sell rating on the ASX bank's shares and tip an average downside of 8% to $40.35.

The post ASX bank stocks: Buy, sell, or hold? appeared first on The Motley Fool Australia.

Australia's benchmark index is now down 9% since the beginning of the month. 

In this period: 

• National Australia Bank Ltd (ASX: NAB) shares have fallen 10%
• ANZ Group Holdings Ltd (ASX: ANZ) shares have dropped 7.3%
• Westpac Banking Corp (ASX: WBC) shares are down roughly 5%
• Commonwealth Bank of Australia (ASX: CBA) shares have fallen 1.37%.

What's impacting bank shares?

There are multiple factors putting pressure on big four bank shares. 

Firstly, energy costs are rising as a result of the conflict in the Middle East. 

This is reigniting global inflation pressures, complicating the outlook for central banks. 

Additionally, CommBank economists note that persistently higher oil prices could weigh on household sentiment at a time when inflation is already pushing higher and interest rates look like climbing. 

This is a headwind for mortgage borrowers and loan quality.

According to Commbank, the longer the conflict drags on, the more pressure banks will face through slower growth, stressed household budgets, and an uncertain interest rate environment. 

I covered last week two possible outcomes from the current conflict and how investors may decide to construct their portfolios. 

For now, the ASX big four remain in a difficult position – caught between a risk-off market and the broader economic damage an extended energy shock would inflict on their customers.

Is there any opportunity in ASX big four bank shares?

Based on current valuations from experts, it appears sentiment is largely cautious on ASX bank shares. 

CBA recently received a sell rating from Medallion Financial Group. 

The note out of the group said its shares are trading at a significant premium to peers despite having similar earnings growth outlook. 

For Westpac, analyst targets indicate it could continue to fall in the near term. 

14 analyst forecasts via TradingView have an average price target of $35.16 on Westpac shares. 

From yesterday's closing price of $39.72, that indicates a downside of approximately 11%. 

ANZ appears to have the most optimistic outlook from recent analysis. 

Citi have recently retained their buy rating and $40.30 price target on ANZ shares. 

This indicates a potential upside of 10%. 

Finally, Samantha Menzies recently laid out the bull case for NAB shares after the recent 10% fall. 

Analysts views on NAB shares are mixed, with price targets ranging from $30 – $50 per share compared to a current price hovering around $42.75. 

Foolish takeaway 

With messaging changing day to day regarding the Iran/USA conflict, it is extremely difficult to predict the future of blue-chip shares like the ASX big four. 

A quick resolution could mean current valuations are an ideal entry point. 

However if the conflict continues long-term, the more pressure these stocks may come under through subdued growth and unclear interest rate decisions. 

The post How have the ASX big four bank shares held up in March? appeared first on The Motley Fool Australia.

The US and Israel launched strikes on Iran on 28 February (US time) with the intention of destroying Iran's nuclear capability.

This has caused a global fuel crunch, with oil prices skyrocketing due to the effective closure of the Strait of Hormuz.

The Strait is a crucial shipping lane for transporting oil and gas from the Middle East to markets worldwide.

On top of that, fresh missile strikes on energy infrastructure this week have further disrupted oil and gas supply chains.

These events have far-reaching ramifications for individual businesses relying on fuel to power machines and transport goods.

Higher petrol prices are already having a broader economic impact, contributing to the Reserve Bank's call to raise interest rates this week.

Amid all this volatility, how are Australia's top 10 ASX 200 shares faring?

Are they demonstrating resilience, or have they been caught up in the broader market sell-off?

Let's take a look at their share price performance since the start of March.

Commonwealth Bank of Australia (ASX: CBA)

The Commonwealth Bank share price is $176.50, down 0.5% on Friday and up 1.1% since the war began.

Amid the market turmoil, CBA quietly reclaimed its title as Australia's largest ASX 200 share by market capitalisation.

CBA and BHP Group Ltd (ASX: BHP) have been passing the crown back and forth for the past few months.

On 27 February, BHP reassumed the title.

Less than three weeks later, CBA shares are back on top with more than $50 billion in market cap separating them from BHP shares.

Over 12 months, the CBA share price has lifted 21.1%.

BHP Group Ltd (ASX: BHP)

BHP is the market's largest mining share, and leads the ASX 200 materials sector.

The BHP share price is $47.56, down 1.6% on Friday and down 18.6% since the war in Iran began.

Over 12 months, BHP shares have lifted 22%, and reached a record high of $59.39 apiece last month.

ASX 200 mining shares have been the worst hit by the war, with the materials sector falling 19% so far this month.

Mining shares have fallen because higher oil prices will directly impact operating costs and potentially production, if there's a shortage.

It is also likely that investors are taking profits after a strong 12-month run for materials amid a new longer-term mining boom in Australia.

National Australia Bank Ltd (ASX: NAB)

Business lending specialist NAB is the second-largest ASX 200 bank by market capitalisation.

The NAB share price is $45.82, down 1.7% on Friday and down 6.5% since the start of the war.

Over 12 months, NAB shares have lifted 38%, and reached a record $49.45 last month.

Westpac Banking Corp (ASX: WBC) 

Westpac is Australia's oldest bank.

The Westpac share price is $40.87, down 0.6% today and down 3.9% since the war began.

Over 12 months, the ASX 200 bank share has lifted 33%, and hit a record $43.32 last month.

ANZ Group Holdings Ltd (ASX: ANZ)

The ANZ share price is $36.78, down 0.7% on Friday and down 8.1% since the war began.

Over 12 months, ANZ shares have lifted 26% and reached a record high of $41 last month.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is the largest ASX 200 consumer discretionary share. 

The conglomerate owns household names like Bunnings, Kmart, Officeworks, and Priceline.

The Wesfarmers share price is $73.51, down 0.2% today and down 7.7% since the start of the month.

Over 12 months, Wesfarmers shares are up 4%.

Macquarie Group Ltd (ASX: MQG)

This investment bank is the fifth-largest ASX 200 bank by market capitalisation.

The Macquarie share price is $195.70, down 0.2% on Friday and down 8.3% since the war broke out.

Over the past 12 months, Macquarie shares have fallen by 3%.

CSL Ltd (ASX: CSL)

CSL is still the largest ASX 200 healthcare stock, despite a near-halving in its share price over the past 12 months.

The CSL share price is $137.88, up 2.4% today and down 6% since the war in Iran began.

Over 12 months, CSL shares have fallen 46% due to company-specific issues, including a drop in vaccination rates worldwide.

The CSL share price touched an eight-year low of $133.35 yesterday.

Woodside Energy Group Ltd (ASX: WDS)

Woodside is the largest ASX 200 energy share on the market.

The Woodside share price is $33.92, up 0.7% on Friday and up 19.8% since the war started.

Over 12 months, Woodside shares have increased by 48%.

The oil & gas giant has benefited from rising oil and gas prices since the war began.

Over the past 30 days, the Brent Crude oil price has soared 47% while the European gas price has skyrocketed 96%.

The Woodside share price reached a two-and-a-half-year high of $34.31 in earlier trading today.

Telstra Group Ltd (ASX: TLS)

Telstra is the No. 1 ASX 200 communications share by market cap.

The Telstra share price is $5.31, up 0.1% on Friday and up 2.4% since the war in Iran began.

Over the past 12 months, Telstra shares have risen 28%.

On Friday, the Telstra share price reached a nine-year high of $5.35.

The post Pulse check: How are the top 10 ASX 200 shares performing amid a new war? appeared first on The Motley Fool Australia.

Thanks partly to our unique system of franking, as well as some good old fashioned love of country, it's fair to say that ASX investors have a strong local bias.

When we do branch out to invest beyond our shores, it is usually a direct flight to the US markets. As I've written here before, the US is, as it should be, the first port of call for ASX investors seeking international diversification. No one can deny that the US is home to the vast majority of the world's best and most dominant businesses. No other country's share market constituents can match the size, scope and scale of top US stocks like Amazon, Alphabet, Microsoft, Netflix, Mastercard, Procter & Gamble, Apple, and countless others.

However, that doesn't meaning investing in US stocks isn't without risk. The US-Iran war that has been raging all month proves that. As such, I think the prudent investor might wish to consider diversifying beyond just Australia and America. The easiest way to do this, by far, is by using exchange-traded funds (ETFs).

Let's go through some of the best options for stocks outside Australia and the US.

3 ASX ETFs that can help diversify a portfolio

First up, there's the Vanguard All-World ex-US Shares Index ETF (ASX: VEU). This ETF, as its name implies, throws a whole bunch of different countries' stock markets together, with the notable exception of the US. The largest contributors to VEU's portfolio include Japan, the United Kingdom, China, Canada, India, and Taiwan. A healthy mix of advanced and developing economies there. ASX do feature in this ETF as well, although they make up just 4.3% of the entire portfolio.

Another option to consider is the Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE). VGE focuses exclusively on emerging economies, so you won't find European, British or Japanese stocks here. Instead, VGE's largest contributors are countries like China, Taiwan, Brazil, South Africa and Saudi Arabia.

Finally, investors can consider the iShares MSCI EAFE ETF (ASX: IVE). This fund covers markets from Europe, Asia and the Far East (EAFE). It offers exposure to countries ranging form Japan, Spain and the UK to Germany, Singapore and Israel. Again, Australia is included as well, but contributes just over 6% to IVE's holdings.

Foolish takeaway

All three of these ASX ETFs offer Australian investors an easy way to add exposure to stocks from Europe, Asia and Africa to their portfolios. These regions are under-represented in the vast majority of ASX portfolios, and can help insulate investors from adverse movements on the American or Australian markets.

The post These 3 ASX ETFs can help protect your portfolio in 2026 appeared first on The Motley Fool Australia.

In late morning trade today, shares in S&P/ASX 200 Index (ASX: XJO) bank stock are down 0.4%, trading for $176.47 apiece.

Despite today's dip, that sees CBA shares up 19.9% since market close on 21 January.

For some context, the ASX 200 is down 3.2% over this same period.

But with the Reserve Bank of Australia (RBA) increasing interest rates for the second time in 2026 on Tuesday – lifting the official cash rate by 0.25% to 4.10% – that strong outperformance could be about to shift into reverse.

That's the warning issued by Morgan Stanley this week, with the broker cautioning that CBA's earnings could take a material hit.

Here's why.

Are CBA shares eyeing the perfect storm?

The RBA is back on the tightening path in an effort to rein in resurgent inflation. Higher interest rates work to reduce demand. But if energy prices remain high amid the Iran war, higher rates also could put the brakes on Australia's GDP growth.

Indeed, Morgan Stanley bank analyst Richard Wiles said fast rising interest rates could "fundamentally shift operating conditions" for CBA shares and the other big four ASX bank stocks (quoted by The Australian Financial Review).

"The uncertain environment raises the risk of both earnings downgrades and a de-rating, increasing the probability that banks underperform the ASX 200 in 2026," Wiles said

Amid the prospect of two more RBA interest rate hikes this year, Morgan Stanley expects Australia's GDP growth to slow to 1.6% in 2026, down from 2.6% last year.

This in turn, would likely impact CBA's loan growth. In a worst-case scenario, Wiles said that CommBank could see its earnings downgraded by 8.9%.

Should that occur, Wiles said that CBA shares could plunge more than 42% to $101.50 each.

What about the other big four ASX 200 bank stocks?

It's not just CBA shares that could be looking at a sharp fall.

Wiles estimates that in the above scenario, Westpac Banking Corp (ASX: WBC) earnings would be downgraded by 9.7%; ANZ Group Holdings Ltd (ASX: ANZ) earnings would be downgraded by 10.1%; and National Australia Bank Ltd (ASX: NAB) earnings would be downgraded by 14.3%.

That could see Westpac shares fall more than 35% from the current $41.27 to $26.50; NAB shares could tumble more 30% to $32.90; and ANZ shares could fall almost 20% to $29.80 each.

CBA shares and the other ASX 200 banks are at particular risk as they're already trading at high price to earnings (P/E) ratios.

Wiles concluded (quoted by the AFR):

History tells you that when the RBA hikes, bank price-to-earnings multiples go down. It hasn't happened yet, but that's what's happened historically.

Our own forecasts currently assume a favourable operating environment continues. That means the banks are vulnerable to de-rating risk and that an earnings downgrade risk could emerge if the economy slows down more than expected.

The post How higher interest rates could send CBA shares plunging 42% appeared first on The Motley Fool Australia.

After climbing around 37% over the past year, they've delivered the kind of return investors usually hope for from growth stocks, not major banks.

But with that strong performance now behind it, the more important question is whether there's still value on offer today for a $10,000 investment?

Westpac shares look fully valued after strong run

After a rally like this, I always ask whether the upside is already priced in.

Westpac's latest quarterly update shows a steady, improving business. It delivered around $1.9 billion in quarterly profit, with growth supported by lending momentum and cost discipline.

That's solid. But it's not exceptional enough, in my view, to justify chasing the shares after such a strong run.

Margins are still under pressure, with net interest margin slipping slightly, reflecting competition and a changing rate environment.

So while the business is performing well, I think the share price is already factoring in a lot of that progress.

I wouldn't sell… but I wouldn't buy either

If I already owned Westpac shares, I wouldn't be rushing to sell them.

The bank remains well capitalised, profitable, and positioned to benefit from steady credit demand. Its capital ratio sits comfortably above target levels, and its outlook remains stable.

But investing is about opportunity cost.

And right now, I don't think Westpac offers a compelling risk-reward profile.

Why I prefer CBA instead

If I'm going to invest in a bank, I want the best one.

For me, that's Commonwealth Bank of Australia (ASX: CBA).

Its latest first-half results highlight why. The bank continues to deliver strong and consistent profitability, with cash NPAT of $5.45 billion for the half and a return on equity of 13.8%, which remains sector-leading.

It also declared a fully franked dividend of $2.35 per share, supported by a strong balance sheet and resilient earnings.

What stands out to me is consistency.

CBA continues to execute well, invest in technology, and maintain strong credit quality. Its scale, brand, and operational discipline have allowed it to outperform peers over time.

Yes, it often trades at a premium valuation. But in my experience, there's usually a reason for that.

Quality over alternatives

I tend to lean toward owning the highest-quality business in a sector rather than spreading exposure across multiple similar names.

That's especially true in banking, where differences in execution, margins, and returns can compound over time.

Westpac is improving, but I don't think it's operating at the same level as CBA right now.

And if I already have exposure through CBA, I don't see a strong case to add Westpac on top.

Foolish takeaway

Westpac shares have performed well and the business is on a solid footing. But after a 37% rise over the past year, I think the valuation looks full.

I wouldn't sell if I owned them. But if I had $10,000 to invest today, I'd be looking elsewhere.

For me, that means sticking with the highest-quality option in the sector rather than chasing a bank that has already had a strong run.

The post Should I invest $10,000 in Westpac shares right now? appeared first on The Motley Fool Australia.

The central bank lifted the cash rate by 25 basis points to 4.1% at March's meeting.

The RBA explained:

A wide range of data over recent months have confirmed that inflationary pressures picked up materially in the second half of 2025. While part of the pick-up in inflation is assessed to reflect temporary factors, the Board judged that the labour market has tightened a little recently and capacity pressures are slightly greater than previously assessed. Developments in the Middle East remain highly uncertain, but under a wide range of possible scenarios could add to global and domestic inflation.

In light of these considerations, the Board judged that inflation is likely to remain above target for some time and that the risks have tilted further to the upside, including to inflation expectations. It was therefore appropriate to increase the cash rate target.

What's next for interest rates?

Last year, the RBA changed its meeting schedule from monthly to eight times a year.

One of the months that doesn't have a meeting is April, which means the central bank has a bit of time to observe economic data, run its numbers, and ultimately make its decision on where interest rates are going next.

At present, the RBA Rate Indicator, which is based on the ASX 30 Day Interbank Cash Rate Futures May 2026 contract, suggests that there is a good probability of a rate increase at the May meeting.

The RBA Rate Indicator currently sits at 57% in favour of an increase to 4.35%. If this proves accurate, it will mean three meetings in a row of hikes to interest rates, much to the dismay of borrowers.

Will the RBA hike?

Unfortunately, the economics team at Westpac Banking Corp (ASX: WBC) appears to believe that the market is onto something with its prediction.

Australia's oldest bank believes the RBA will increase interest rates in May, before pausing at 4.35% for the foreseeable future.

Westpac's senior economist, Mantas Vanagas, commented:

Domestically, focus was on the RBA – as anticipated, the central bank raised the cash rate by 25bp for the second time this year, bringing it to 4.10%. The narrow 5–4 vote in favour of tightening highlighted significant differences of opinion within the Monetary Policy Board, however, Governor Bullock clarified at the press conference that these differences concerned the timing of the hike, not the direction of policy. We continue to expect another interest rate increase in May, though it will likely depend on developments in the Middle East conflict.

After a rate hike in May, Westpac expects rates to stay at 4.35% until late 2027. It then expects rates to fall to 3.6% by March 2028.

The post Why the RBA could increase interest rates again in May appeared first on The Motley Fool Australia.

Will the market be able to bounce back from this on Tuesday? Here are five things to watch:

ASX 200 set to rebound

The Australian share market looks set for a good session on Tuesday following a decent start to the week in the US. According to the latest SPI futures, the ASX 200 is poised to open the day 43 points or 0.5% higher. In late trade on Wall Street, the Dow Jones is up 0.8%, the S&P 500 is up 0.95%, and the Nasdaq is 1.1% higher.

Oil prices sink

It could be a poor session for ASX 200 energy shares Karoon Energy Ltd (ASX: KAR) and Santos Ltd (ASX: STO) after oil prices sank overnight. According to Bloomberg, the WTI crude oil price is down 4.75% to US$93.89 a barrel and the Brent crude oil price is down 2.7% to US$100.31 a barrel. This was driven by news that Donald Trump is pressuring allies to protect tankers in the Strait of Hormuz.

RBA meeting

Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) shares will be on watch on Tuesday when the Reserve Bank of Australia (RBA) makes its decision on interest rates. According to the latest cash rate futures, the market is pricing in a 71% probability of the RBA lifting the cash rate by 25 basis points to 4.1%.

Gold price softens

ASX 200 gold shares Evolution Mining Ltd (ASX: EVN) and Ramelius Resources Ltd (ASX: RMS) could have a subdued session on Tuesday after the gold price softened overnight. According to CNBC, the gold futures price is down 0.85% to US$5,019.4 an ounce. Inflation fears have been weighing on the precious metal.

ASX 200 shares going ex-div

A number of ASX 200 shares are going ex-dividend today and could trade lower. This includes job listings company Seek Ltd (ASX: SEK), plumbing parts company Reece Ltd (ASX: REH), and debt collector Credit Corp Ltd (ASX: CCP). With respect to Seek, it will be rewarding its shareholders with a fully franked 27 cents per share interim dividend on 1 April.

The post 5 things to watch on the ASX 200 on Tuesday appeared first on The Motley Fool Australia.

Atop potential further share price gains, Westpac has historically paid out two fully franked dividends a year.

As for the share price, in early afternoon trade today, shares in the S&P/ASX 200 Index (ASX: XJO) bank stock are up a slender 0.1%, changing hands for $41.01 apiece.

For some context, the ASX 200 is down 0.4% at this same time.

Taking a step back, Westpac shares have strongly outperformed over the past year, now up 37.2% and handily outpacing the 9.3% 12-month gains delivered by the benchmark index.

We'll take a look at just how many Westpac shares you'd need to buy for a $10,000 annual passive income below.

But first…

Important reminders on your passive income goals

Before digging into the passive income potential from Westpac, remember that a properly diversified ASX dividend portfolio will contain a lot more than just a single stock.

There's no magic number. But somewhere in the range of 10 to 20 dividend stocks is a decent ballpark figure. Ideally these will operate in various segments and geographic locations. That will reduce the risk of your income stream taking a big hit if any one company or sector runs into a rough patch.

Also, remember that the yields you generally see quoted are trailing yields. Future yields may be higher or lower depending on a range of company specific and macroeconomic factors.

In Westpac's case those include the performance of the Aussie economy, with banks generally more profitable during times of economic growth. And interest rates also play a factor. Banks are often able to improve their net interest margin (NIM) amid higher interest rate environments.

Now, returning to our headline question…

Banking on Westpac shares for $10,000 a year in passive income

Over the past 12 months, Westpac paid two fully franked dividend.

The ASX 200 bank paid an interim dividend of 76 cents per share on 27 June. And Westpac paid out its final dividend of 77 cents per share on 19 December.

That equates to a full year passive income payout of $1.53 a share.

So, to secure your $10,000 yearly passive income stream (based on the trailing yield), you'd need to buy 6,536 Westpac shares today, with potential tax benefits from those franked credits.

How much would that cost?

At the current Westpac share price of $41.01, you'd need to invest $268,041 now to aim for that $10,000 yearly passive income.

You could also invest smaller amounts on a monthly basis to reach that income goal over time.

Westpac shares trade on a fully franked trailing dividend yield of 3.7%.

The post How many Westpac shares do I need to buy for a $10,000 annual passive income? appeared first on The Motley Fool Australia.

And that's easy to understand. The big four banks have historically paid generous fully franked dividends and have been reliable income generators for Australian investors.

But at the moment, I'm not convinced Westpac shares look particularly attractive.

Its share price has climbed strongly and its valuation now reflects a lot of optimism. As a result, I think it makes sense for investors to at least consider other opportunities in the market.

Personally, if I were looking for dividend income today, I would rather buy these ASX dividend shares instead of Westpac.

Telstra Group Ltd (ASX: TLS)

When I think about reliable dividend payers on the ASX, Telstra is one of the first companies that comes to mind.

The telecommunications giant generates steady cash flow from providing mobile, broadband, and network services to millions of customers across Australia. That kind of recurring revenue can be very supportive when it comes to paying dividends.

What stands out to me is how resilient the business model is. People might cut back on discretionary spending during tougher economic periods, but mobile and internet services are now essential parts of everyday life.

Telstra has also been investing heavily in its network and digital capabilities, which should help support its long-term competitiveness. In my view, that combination of reliable earnings and ongoing investment makes it an appealing option for income investors.

Wesfarmers Ltd (ASX: WES)

Wesfarmers might not always have the highest dividend yield on the ASX, but I still think it deserves attention from income-focused investors.

The company owns a portfolio of high-quality businesses including Bunnings, Kmart, and Officeworks. These retail operations generate strong cash flow and have historically delivered solid returns on capital.

What I personally like about Wesfarmers is the balance between income and growth. The company pays attractive dividends while also reinvesting in new opportunities and expanding its businesses.

That approach has helped it deliver strong long-term shareholder returns, which in my view can be just as important as the headline dividend yield.

APA Group (ASX: APA)

Infrastructure businesses can be particularly attractive for income investors, and APA Group is a good example.

The company owns and operates one of Australia's largest energy infrastructure networks, including gas pipelines and energy assets that stretch across the country.

Many of its assets operate under long-term contracts, which helps provide predictable revenue streams. That kind of stability can support consistent dividend payments.

While the energy sector is evolving, infrastructure assets like pipelines remain an important part of the energy system. Personally, I think that stability makes APA a compelling option for investors seeking dependable income. Its forecast dividend yield of over 6% in FY26 is also attractive.

Foolish takeaway

Westpac will likely remain a popular choice for dividend investors.

But in my view, income opportunities on the ASX go well beyond it.

Companies like Telstra, Wesfarmers, and APA offer exposure to different industries while still providing attractive dividend income. For investors looking to diversify their income streams, I think these types of businesses are well worth considering.

The post 3 ASX dividend shares I'd buy instead of Westpac appeared first on The Motley Fool Australia.

Just a couple of weeks ago, another rate hike at this month's meeting looked unlikely after February's increase, but a sudden spike in oil prices caused by war in the Middle East has changed everything.

In fact, the market believes that there's a strong probability the RBA will lift the cash rate on Tuesday. But will that be the case? Let's see what the economics team at Westpac Banking Corp (ASX: WBC) is predicting.

Will interest rates increase next week?

According to the latest cash rate futures, the market has priced in a 66% probability of a 25 basis point increase to 4.1% next week.

Unfortunately for borrowers, Westpac agrees with the market and expects the RBA to make another move in March.

Even worse, the bank's economics team believes a further increase won't be far behind.

Westpac's chief economist, Luci Ellis, said:

The RBA is now expected to hike the cash rate by 25bp in both March and May; this is a change from our previous view of a single hike in May with further hikes as a risk only. The expected peak cash rate is now 4.35%. The effect of higher oil prices on headline inflation is large but temporary. The RBA Monetary Policy Board will nevertheless feel compelled to react, especially given the hit to confidence and financial markets from the Middle East conflict has so far not been severe.

When will there be some relief?

Westpac believes that the interest rate hikes in March and May will be where it ends. After which, the bank is forecasting cuts in late 2027 and early 2028. Ellis adds:

By the end of next year, underlying inflation will be close to the 2½% target midpoint and unemployment noticeably higher. It will also be clearer that supply capacity growth is above 2% and that labour market slack is building outside the formal labour force. We therefore also shift our expectations of the necessary reversal of tight policy, to November and December 2027 and February 2028 (was November 2027 and February 2028).

This is expected to see the cash rate down to 3.6% by the middle of June 2028.

The post Here's what Westpac says the RBA will do with interest rates next week appeared first on The Motley Fool Australia.

Experts at investment bank UBS have looked at the situation and think that another interest rate increase looks very likely this year. In-fact, UBS has brought forward when it thinks that hike is going to happen, changing its rate hike prediction to this month (rather than May).

For starters, UBS pointed to RBA Deputy Governor Andrew Hauser's interview with The Conversation's Politics with Michelle Grattan podcast.

RBA Deputy Governor's hawkish comments

UBS said Hauser's comments to the podcast came just before the 'blackout period' for the March 2026 meeting and the commentary was "hawkish".

The experts suggested that these comments can be viewed as a "signal", along with analysis that inflation is coming in stronger than expected. UBS highlighted the following words from the commentary:

Our projection in February before the Iran attacks was for inflation only to return to the midpoint of the target on the assumption, the technical assumption, that the cash rate did pick up a little bit further from where it is now… We've had some data that seem to have confirmed even more decisively than we had before, that our economy currently has limited spare capacity.

Unemployment came in a bit below expectations. Job adverts and other measures of demand for labour were a little higher. GDP growth came in at 2.6 per cent … but it's rather bigger than our 2 per cent estimate of the capacity of the sustainable rate of growth in the economy. Inflation was in line in January with our expectations … [but] that's well above our target range. So against that backdrop … further increases of prices from Iran, if that is what we end up seeing, and that is a big if, is not a helpful development from the perspective of our policy discussion.

Inflation, GDP and unemployment remain strong

UBS has pointed out in recent commentary that data flow showed CPI inflation, GDP and unemployment was stronger than expected and "warranted further (and earlier) increases in the cash rate".

But, weak consumer data made UBS think the RBA would wait until May.

Hauser's comments seemed to downplay the 'miss' of expectations about consumer spending, while UBS had expected the RBA to place a substantial weight on that aspect.

The rise in the oil/petrol price has led to UBS increasing its CPI inflation forecasts. The broker is now forecasting that the inflation for the first quarter of 2026 will be 1.3% quarter-over-quarter and 4.1% year-over-year. There's potential for the inflation to be even stronger if the oil price shock is prolonged.

UBS said this is worrying for consumer inflation expectations that had already been trending higher for months.

The broker thinks the RBA will look to act early by hiking in March 2026 to "shore against this risk".

Could more RBA interest rate hikes happen?

UBS said it had already been expecting a further 50 basis points of rate hikes by the RBA by August 2026.

The broker said it doesn't think there will be unanimous vote to hike in March, and looking ahead, it will review its RBA profile of the timing, and terminal rate forecasts, after the RBA's March meeting.

Time will tell what happens with interest rates, but UBS and one of the RBA's officials are not liking what they see with regards to inflation. It will be interesting to see how this impacts the net interest margin (NIM) of big banks like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB)

The post Here's what experts think will happen with the RBA interest rate this month appeared first on The Motley Fool Australia.

At the time of writing, 11 out of 12 Australian banks listed on the ASX are trading in the green. 

ASX banks have historically outperformed many global bank peers thanks to Australia's highly concentrated, stable, and well-regulated bank sector. Many global banks operate in fragmented or volatile markets, whereas in Australia, local banks are subject to strict risk management.

Australian bank stocks are also less exposed to global financial and credit crises, unlike some US or European banks. And they pay high and reliable dividends to their investors. 

When it comes to bank stocks, which I think could outperform the rest in FY26 and FY27, here are my top three picks.

ANZ Group Holdings Ltd (ASX: ANZ) 

ANZ is going full steam ahead with its strategy to strengthen and simplify its business and significantly reduce operational costs this year. 

The first phase of the Australian bank's ANZ 2030 strategic restructuring will see the company accelerate the integration of Suncorp Bank, roll out its ANZ plus platform to replace old technology, and plan to reduce costs and go back to basics by cutting around 8% of its workforce by late 2026.

The bank's strategy to simplify and strengthen its business could improve net interest margins and return on equity, which could help ANZ outpace growth of its global peers over the next 12 months.

Westpac Banking Corp (ASX: WBC) 

Westpac has gained traction in the first quarter of FY26 as its cost-reduction drive is starting to deliver results. 

Its solid first-quarter update showed steady earnings growth, improved credit quality, and a strong capital position.

The bank is targeting another $500 million in productivity gains in FY26. It also has plans to roll out new technology this year, including AI training for all staff and expanding its business banking solutions.

If Australia's economy remains resilient, Westpac's consistent earnings and investor support could drive profitability higher in FY26 and FY27.

National Australia Bank Ltd (ASX: NAB) 

NAB is another Australian bank stock that has strong profit growth and efficient operations. The bank has historically demonstrated careful cost management, ensuring that its revenue translates into profit.

Like its local peers, NAB reported strong first-quarter results for FY26, which showed strong cash profit year on year. And going forward, it plans to continue growing its business and home lending portfolios while keeping operating expense growth below FY25's rate. The bank is targeting more than $450 million in productivity savings for the full year. 

NAB's strong earnings growth and profitability savings plans could help it outperform global peers, especially if interest rates begin to rise again. 

The post 3 Australian bank stocks that could outperform global peers again in 2026 and 2027 appeared first on The Motley Fool Australia.

Imagine receiving $1,000 every month without needing to sell any shares. That kind of income can help cover everyday expenses, supplement a salary, or support a more comfortable retirement.

The good news is that the Australian share market has a long history of producing reliable dividend income. In fact, the ASX is one of the most income-friendly markets in the world thanks to the strong dividend culture among Australian companies.

So how could you aim to earn $1,000 per month from ASX dividends?

Where to begin

The first step is converting the monthly goal into an annual income target.

If you want to earn $1,000 per month in dividends, that works out to $12,000 per year.

From there, the next step is estimating the dividend yield your portfolio could reasonably produce. Many diversified ASX income portfolios aim for a yield somewhere around 4%.

Using that figure, you can estimate how much capital might be required.

At a 4% dividend yield, generating $12,000 per year would require an investment of roughly $300,000.

Of course, dividend yields vary across companies and the share market changes over time, so this figure should be viewed as a rough guide rather than a guarantee.

Building the ASX dividend portfolio

Once the income target is clear, the focus shifts to building a portfolio capable of generating that yield while remaining diversified.

A common approach is combining reliable ASX dividend-paying shares with diversified income exchange-traded funds (ETFs).

For example, large Australian banks such as Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) have historically been strong dividend payers.

Infrastructure businesses like Transurban Group (ASX: TCL) and APA Group (ASX: APA) can also contribute steady income thanks to the predictable cash flow generated by long-life assets such as toll roads and energy infrastructure.

Defensive companies like supermarket operator Woolworths Group Ltd (ASX: WOW) and telecommunications provider Telstra Group Ltd (ASX: TLS) can add further stability to an income-focused portfolio.

Some investors may also include a dividend-focused ETF such as the Vanguard Australian Shares High Yield ETF (ASX: VHY). This type of ETF provides exposure to a broad portfolio of high-yielding Australian shares in a single investment.

The benefit of combining individual dividend stocks with ETFs is that it spreads risk across multiple sectors while still providing exposure to the ASX's income potential.

Let dividends compound

One important thing to remember is that most investors don't start with $300,000 ready to invest.

Instead, many people gradually build their dividend portfolio over time.

In the early years, reinvesting dividends and continuing to add new capital can help the portfolio grow much faster. Over time, the compounding effect of reinvested dividends can make a significant difference to both the size of the portfolio and the income it generates.

Eventually, that growing stream of dividends can begin to cover meaningful expenses.

Foolish takeaway

Earning $1,000 per month in ASX dividends may sound ambitious, but it becomes much more achievable when you break the goal down.

By building a diversified portfolio of dividend-paying companies and income-focused ETFs and giving the portfolio time to grow, investors can steadily work toward creating a reliable passive income stream from the share market.

The post The easiest way to earn $1,000 a month in ASX dividends appeared first on The Motley Fool Australia.