Even though Aussie interest rates remain above those of many developed nations (2.5% versus little more than zero across Europe and the U.S.), savers and income-seeking investors are still having a tough time of it. Indeed, Reserve Bank governor Glenn Stevens stated recently that he isn't thinking about monetary tightening and that he feels he has the scope to push rates lower.
With that in mind, here are three bank shares that pay great yields and that could help to boost the income from your portfolio.
1. Commonwealth Bank of Australia
With a trailing 12-month dividend yield of 4.7%, Commonwealth (ASX: CBA) appeals as an income play – especially when it yields 20 basis points more than the ASX 100. Furthermore, Commonwealth has a great history of making its (fully franked) dividend payments, not skipping any payments during the credit crunch. Indeed, despite dividends being cut by 14.3% in 2009, they have risen each year since and are now well covered at 1.3 times. With shares in Commonwealth trading on a price-to-book ratio of 2.9, shares in the bank seem to offer reasonable value for money, too.
2. Westpac
An even better yield is on offer at Westpac (ASX: WBC), with its trailing 12-month yield being a highly impressive fully franked 5.3%. That's 80 basis points higher than the ASX and almost 300 basis points more than the current base rate. Furthermore, Westpac trades on a price-to-book ratio of 2.3, which is less than that of sector peer Commonwealth, and it has a history of reliable payments.
Like Commonwealth, Westpac cut dividends per share by 18.3% in 2009, but began increasing them the year after. Today, a dividend payout ratio of 79.5% seems comfortable to allow the bank to reinvest but also remain generous to its shareholders.
3. ANZ
Like its two peers, ANZ (ASX: ANZ) offers a great trailing 12-month yield of 5.2% (fully franked), which beats the market yield by 70 basis points and provides investors with a realistic alternative to savings accounts at a time when interest rates could move lower.
In addition, ANZ trades on the lowest price-to-book ratio of the three banks at just under 2, while its dividend is well covered at 1.4 times. Furthermore, the bottom line is expected to maintain upward momentum next year, when it is forecast to grow by 4.3%. This should allow ANZ to increase dividends per share and make the stock an even better income play.
