Below is a table of the 6 largest banks listed on the ASX. They are ordered according to which bank pays the best dividends. All of the distributions paid by shares listed in the table below are fully franked.
|NAB||National Australia Bank||$33.49||5.9%||6.8%||80%|
|BEN||Bendigo and Adelaide Bank||$11.73||5.3%||9.5%||76%|
|ANZ||ANZ Banking Group||$33.49||5.2%||12.6%||70%|
|BOQ||Bank of Queensland||$12.00||5.2%||3.6%||90%|
As you can see the National Australia Bank is a clear leader in terms of yield, but there are a number of other factors to consider.
Dividend Growth InvestingWhile the current dividend yield is important for those investors looking for income, the level of future payments should be just as important. If you plan on holding your shares for the long term, growth in future dividends could dwarf your current yield.
In the table above, the fifth column is the average annual growth rate of dividends for bank shares over the past 5 years. Although some investors liken looking at historical figures as akin to driving while looking in the rear view mirror, sometimes history can be a good predictor of the future.
The table shows that although NAB shares currently have the highest rate of return, they also have the second lowest growth rate (behind Bank of Queensland). Westpac, ANZ and Commonwealth Bank each have historical growth rates over 10%.
Dividend Yield Is A Function Of Share PriceBut the amount of the payment is only one half of the dividend yield equation - share price is the other. As the price goes down, the yield goes up (and vice-versa). So the cheaper you can buy your shares, the higher the yield.
Of course, sometimes a high yield (and its corresponding low share price) is a vote of no confidence from investors. It may be that investors are concerned about the future prospects of the company. Make sure you do your research and don't invest solely on the basis of a good dividend yield.