The Commonwealth Bank of Australia (ASX: CBA) is up nearly 5% in the past month, surging to trade at around $83.00 currently.
Peers Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) are also trading higher compared to a month ago, but not as well as CBA.
John Abernethy, Chief Investment Officer at Clime Asset Management says the banks will realise that their dividend payout ratios are too high and that retained earnings is their most sensible capital management approach. If that plays through, bank shareholders will need to get used to lower dividends and dividend yields.
Commonwealth Bank currently yields 5.1% at the price of around $83, but that will fall below 5% if the dividend is cut – although the share price could also get hammered as investors sell out in favour of other income plays.
With the risks rising of bank dividends being cut, Foolish investors should ensure they have exposure to a diversified array of dividend payers – not just the big four banks.
