Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares could move today after holding its AGM.
What did the company say?
At the AGM ANZ reminded shareholders that the FY20 result was heavily impacted by COVID-19. Its statutory profit was $3.58 billion, down 40% compared to FY19.
However, the major bank tried to reassure investors by pointing out that on an underlying basis, profit before provisions was down 1% for the year with revenue and expenses broadly flat. But ANZ has to account for potential future losses with provisions – that’s why it set aside a further $1.7 billion to take its total reserves to more than $5 billion.
For 2020, ANZ has paid dividends of 25 cents per share and 35 cents per share. This partly reflected the difficult economic conditions, but it was also at the direction of APRA to withhold plenty of profit/capital to ensure that the banks remained unquestionably strong.
Yesterday, the regulator announced that banks would no longer have limits placed on them in regards to dividend payments. However, boards should still careful about how much they pay as dividends.
So what will ANZ do with the dividend now?
ANZ said that the board will continue to review its approach in the New Year, particularly given the improving economic outlook and APRA’s announcement that it will remove the cap on its payout ratios.
The final decision as a board will be influenced by how the remainder of the crisis evolves, particularly from a macro-economic perspective and its views on the longer term sustainability of its dividend.
The ANZ Chairman Paul O’Sullivan said: “Let me assure you however, your Board is acutely aware of the reliance many shareholders place on their regular dividend, and on the value of franked dividends.”
Based on estimates on CommSec, ANZ is projected to pay a dividend per share of $1.40 per share in FY23. This would amount to a yield, excluding franking credits, of 6%.
Despite that seemingly high yield, banks don’t attract me as dividend ideas. This year has shown that dividends can go through big cuts in bad times. I’d prefer other ASX dividend shares like Brickworks Limited (ASX: BKW) or APA Group (ASX: APA).
