Australia and New Zealand Banking Group Ltd (ASX: ANZ) reported its HY21 result which included a big dividend increase. Is it a good ASX dividend share?
What happened with the ANZ dividend?
The ANZ board decided to double its dividend from the FY20 second half of $0.35 to $0.70 in this HY21 result.
This represented a dividend payout ratio of 66% of cash profit / earnings per share (EPS).
ANZ said that a combination of strong capital management, solid earnings and improving conditions provided the Board with confidence to pay this interim dividend.
The big bank also said that its capital position provides flexibility to return surplus capital to shareholders. Any decision will balance the importance of capital efficiency against maintaining an appropriately strong balance sheet as it continues to get more clarity around the economic situation.
ANZ said that its common equity tier 1 (CET1) capital ratio improved by 110 basis points (1.10%) to 12.4%.
Was the profit any good?
It reported that continuing operations cash profit was up 28% to $2.99 billion compared to the second half of FY20. Statutory profit after tax jumped 45% to $2.94 billion compared to the second half of FY20.
A key driver of the above numbers included a net credit provision release/benefit of $491 million.
However, looking under the hood, there was a bit of a decline of underlying profit. Still comparing to the second half of FY20, continuing operations cash profit before credit impairments fell 10% to $3.94 billion.
ANZ said that Australia retail and commercial had another good half, becoming the third largest home lender in the market. Deposits also performed well, with retail and small business customers behaving prudently by building solid savings and offset balances through the half.
While the pandemic hasn’t resulted in large credit losses to date, the bank still has almost $4.3 billion in reserve in conditions deteriorate.
So is ANZ an attractive ASX dividend share?
ANZ normally likes to pay a similar dividend in the second half as the first half. If ANZ pays the same $0.70 dividend per share then it would amount to $1.40 per share for the whole of FY21.
At the latest ANZ share price, that translates to a fully franked dividend yield of 5%.
In the good times, ANZ clearly offers a good dividend. However, the difficulty is when recessions and shocks come along – like COVID-19. That saw a big dividend cut from ANZ and other major banks.
I like to try to find ASX dividend shares that can be reliable even during recessions, so ANZ isn’t at the top of my list.
