We all probably own a portion of shares in one, if not all of the Big 4 Banks in Australia. Whether that is directly in your own personal portfolio or even possibly through ETF’s and LIC’s, Australian’s are exposed to the banking sector. But the question remains, who offers the best and most stable yield among the Big 4?
Taking a look at the table supplied, I have taken data from Market Index and used trailing dividend amounts. As we know NAB recently decreased their dividend and that is why it is $1.66 a share instead of the near $2 a share it used to be. Taking a look at the table gives some information before Franking Credits.
ANZ, NAB and Commonwealth Bank are all very similar in their yields, in that low to mid 5% yield which seems somewhat “reliable”. The banks have been paying these dividends for a very long time, only problem is, they don’t seem to increase over time. To increase dividend payments in the future you would have to participate in the DRP but we can leave that for another post.
Westpac is the clear winner here with the other 3 banks following very closely to each other. Can Westpac maintain their dividend and competitive advantage when it comes to dividend payout ratio’s, time will tell.
Another thing to consider before anyone puts money into banks at this point in time is interest rates. As we all are very well aware of, interest rates are falling and it does look like that trend will continue. In the short term, this will decrease total Revenue from all banks, which is fine, as long as the banks can maintain their Net Interest Margin (NIM). Currently, there are plenty of smaller banks (like MyState Bank) who offer very similar products to the large 4 banks but offer a “smaller” and friendlier mindset.
MyState Bank current have a share price of $4.59 a share and offer a fully franked yield of 8.95% (6.26% before franking credits). Net Interest Margin has been falling for most of these banks, but to counteract that and still continue to make a profit the banks are lending out more. Seems that MyState Bank has gone from having loans in excess of 4.2 Billion (AUD) to well over 5 Billion (AUD) in loans with an increase in high quality loans (<80% LVR) in a matter of two years. This represents over 10% increase p.a. recently which is fantastic, if this trend continues, which will see MyState Bank continue to post great performance statistics.
I own all banks discussed, directly or indirectly. Please note, this is not financial advice, this is a discussion.