Sebastian Bowen This ASX bank’s share price is up almost 15% for this year so far, and up more than 20% if you include dividends. It may be one of the best banking stocks on the ASX, and it’s one that I consider a buy at current prices.
Yes, we are talking about Australia and New Zealand Banking Group, otherwise known as ANZ.
ANZ is one of my favourite ASX banks out of the ‘Big Four’. Unlike its cousin National Australia Bank Ltd. (ASX: NAB), ANZ came out of the 2018 Royal Commission without a sacked chairman and CEO.
Also, unlike its other cousins Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA), ANZ doesn’t lean on the retail banking sector for the vast majority of its earnings and has a higher exposure to business credit loans. Between 2015 and 2018, the bank provided approximately $52 billion in home lending credit (mortgages), but during the same period, lent more than $95 billion in business loans. Its share of the Australian mortgage market (owner-occupier) sits at 16%, which is healthy but not at the levels of Westpac at around 24%.
I think this characteristic of ANZ is a big advantage. If there is a property slump or housing crisis, ANZ will be better placed to weather the storm due to its diversified balance sheet.
ANZ has also just completed a share buy-back program. Warren Buffett himself has said that he loves share buy-backs, and has done several with his own company Berkshire Hathaway over the past year. Share buy-backs decrease the amount of shares on the open market, giving existing shareholders an automatic return. Over the past year, the ANZ share price has been at historically low levels, so the company is also likely to be sitting on a profit with the bought-back shares to boot!
ANZ’s dividend at current prices is yielding 5.84%, or 8.34% if including franking credits. This is a juicy yield and one which is looking relatively sustainable at current levels. ANZ currently pays out about 72% of its profits as dividends, which is pretty low for a bank (Westpac is currently over 80%). I think this payout ratio puts the bank on a solid footing and unless there is a significant economic downturn, I expect that the dividend yield is relatively safe at these levels.
In my opinion, ANZ is a quality bank with a quality yield. Although I don’t expect significant capital gains in the share price going forward, I think for an income investor, ANZ is a great stock to look at.
Sure, ANZ is ok… But don’t miss this bank I love for growth AND income!
BRAND NEW! For a limited time, The Motley Fool Australia is giving away an urgent new investment report with all the details on our #1 BANK STOCK for the next 12 months and beyond…
Now, if you’ve been around this site for any length of time, you know The Motley Fool usually shuns bank shares.
But we’ve recently discovered a ‘hidden in plain sight’ bank stock with what we think is mouth-watering potential.
With the company boasting nearly 25% net profit growth every year for the last 5 YEARS…
And the shares paying a fully franked dividend that beats the pants off term deposits!
So if you like steady, high-growth income plays – we’ve got you covered!
You’re invited. Simply click the link below to discover our #1 ASX bank stock to profit in 2019. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a brief time only.
Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.