Could Australia and New Zealand Banking Group Ltd (ASX: ANZ) be considered a good dividend share right now?
What’s happening with ANZ shares right now?
On the profit side of things, ANZ is seeing a good recovery of profit from the worst of the COVID-19 problems.
The big Australian and New Zealand bank recently revealed its half year result. 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.
The ANZ share price has been rising in expectation of a profit recovery over the last six to 12 months. Investors are expecting a continuing recovery over the rest of 2021.
The major bank’s board decided to double the interim dividend from 35 cents to 70 cents per share. Not many ASX 200 shares are doubling their dividends right now. However, ANZ was starting from a much smaller (yield) base.
Its balance sheet continues to strengthen. The common equity tier 1 (CET1) ratio increased by another 110 basis points to 12.4%.
Is it a really good dividend option?
If ANZ pays another dividend of $0.70 at the full year result, then that would bring the full dividend to $1.40 per share. At the latest ANZ share price, that would represent a full year dividend yield of 5%. Investors are expecting further cash shareholder returns with all of the balance sheet capital that it’s currently holding. There are likely to be higher dividends, but there could also be share buybacks if the board decides that’s the best way to return capital to investors.
Whilst the next couple of years of dividends might be good, I’m not sure there will be much growth after that. Prior to COVID, there wasn’t much growth happening.
Remember, bank dividends are not term deposits. They are not guaranteed. COVID-19 showed that big dividend cuts can happen to banks. It’s not helpful if there’s a recession and your (dividend) income gets cut exactly when you need it.
There might be other ASX dividend shares out there that could be able to be more reliable as well as deliver more dividend growth.
