Are ANZ (ASX:ANZ) shares a buy for dividend income today?

Is the Australia and New Zealand Banking Group (ASX: ANZ) share price a buy today for future dividend income?
The post Are ANZ (ASX:ANZ) shares a buy for dividend income today? appeared first on Motley Fool Australia. –

piles of coins increasing in height with miniature piggy banks on top

The Australia and New Zealand Banking Group (ASX: ANZ) share price is having a great day today. At the time of writing, ANZ shares are up 1.14% to $19.53. Sure, this ASX bank is still down more than 20% year to date and is trading at the same levels as it was back in September 2011. But it’s also up close to 40% from its March lows if we try and stay on the bright side of life.

So seeing as ANZ is still looking relatively cheap from a historical standpoint, is the ANZ share price a buy today?

A cheap ASX banking share?

Looking at how ANZ is being priced right now, I do think a deep look into the company is merited. With a price-to-earnings (P/E) ratio of 13.3 on current pricing, ANZ is the cheapest ASX bank out of the big four. In contrast, Commonwealth Bank of Australia (ASX: CBA) is currently on a P/E ratio of 17.15, National Australia Bank Ltd (ASX: NAB) is on 17.48 and Westpac Banking Corp (ASX: WBC) is on 14.17.

But no one buys ASX bank shares on P/E alone (at least that I know of), so let’s drill down to the real reason ASX investors tend to go for banks: dividend income.

As you might know, 2020 has been a truly dismal year for ASX bank shareholders. Not only have the banks’ share prices been smashed this year, the once-plentiful dividend streams have flirted with the way of the dodo.

Are ANZ shares an ASX dividend buy today?

Unlike Westpac, ANZ has actually paid a dividend in 2020 – a fully franked 25 cents per share interim dividend that was paid out last month. However, this does pale in comparison to the double set of 80 cents per share payouts that ANZ investors received last year.

That’s not entirely ANZ’s fault. The banking regulator APRA has ‘instructed’ ASX banks to limit their dividend payouts to 50% of their earnings in order to maintain the stability of the financial sector. The 25 cents per share ANZ dividend represented approximately 46% of the banks’ earnings, so we can’t really blame ANZ for that one.

But what of the future?

Well, if we assume ANZ is able to pay two 25 cents per share dividends in 2021, it would indicate a forward dividend yield of 2.56% (or 3.66% grossed-up if fully franked). If APRA lifts this dividend cap, and ANZ manages to keep earnings stable next year and pays out 75% of its earnings (as was common pre-2020), you could expect a rough forward yield of 3.85%. But take that with a handful of salt, because there are a lot of variables there.

Foolish takeaway

Looking at ANZ, I can’t help but think that there are better options for dividend income on the ASX out there today. Sure, a 2.56% yield isn’t nothing. But personally, I would rather go with one of the many ASX dividend shares out there with more certain futures, and higher yields today.

These Dividend Stocks Could Be Your Next Cash Kings (FREE REPORT)

Motley Fool Australia’s Dividend experts recently released a brand-new FREE report revealing 3 dividend stocks with JUICY franked dividends that could keep paying you meaty dividends for years to come.

Our team of investors think these 3 dividend stocks should be a ‘must consider’ for any savvy dividend investor. But more importantly, could potentially make Australian investors a heap of passive income.

Don’t miss out! Simply click the link below to grab your free copy and discover these 3 high conviction stocks now.

Click Here For Your Free Stock Report

Returns As of 6th October 2020

More reading

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Are ANZ (ASX:ANZ) shares a buy for dividend income today? appeared first on Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!