The RBA has pushed Australian interest rates to amazing (or horrifying) lows. Could ASX regional banks be the answer for dividend income?
Many investors are drawn to the big ASX banks like NAB (ASX: NAB) and Westpac (ASX: WBC). But the second tier regional banks also have big yields.
Bendigo Bank (ASX: BEN)
Bendigo Bank has a fully franked dividend yield of 6.4%.
Bendigo and Adelaide Bank was formed following the merger of Bendigo Bank and Adelaide Bank in November 2007. The bank operates primarily within the retail banking space and has a network of more than 500 branches and agencies across Australia, predominantly on the East Coast and South Australia.
The regional bank has delivered stable dividends over the past few years and has a different selling point with its focus on community. The recovery of the housing market could be a good thing for the shorter term earnings.
BOQ (ASX: BOQ)
BOQ has a fully franked dividend yield of 7.15%.
BOQ is one of Australia’s leading ‘regional’ banks with more than 180 branches throughout Australia. Unlike many other banks, many of BOQ’s branches are run by their ‘owner-managers’, who are effectively small business owners. Most of BOQ’s loans are mortgages.
The Queensland based bank has tried to differentiate itself with a personalised service. It has a bit more exposure to the Queensland housing market than other banks, so that could be a positive or negative depending on your viewpoint.
However, the BOQ dividend has been falling over the past two years. In FY18 it dropped from $0.84 per share to $0.76 per share. In the recent FY19 result it dropped again to $0.65 per share.
Suncorp (ASX: SUN)
Suncorp has a fully franked dividend yield of 5.2%.
Suncorp Group is a $17 billion insurance and banking company. It has its own brand of products but also operates under names like AAMI, GIO, Apia and Shannons. It also operates a regional banking division called Suncorp Bank.
The Suncorp Bank division is one of the largest banks in Australia, but a Suncorp investment would also come with all of the insurance earnings. It could be used to have a diversified financial business, or you may see it as diluting to the part of the business that you want exposure to.
The company has been focused on cutting costs in the past few years. The dividend has been a bit up and down since 2015 with storms playing their part due to profit hits.
Summary
Each of these businesses offers compelling income. But Bendigo Bank is the one that seems to offer the most consistent income, so that’s the one I would want to go for of the three. I also like that it’s a ‘community’ type bank as well. But for reliable dividend I prefer the idea of the shares in the free report below even more, banks aren’t known for growth, and may not be reliable in a recession.
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