A lot of individual investors seem to think that the only large finance companies with big dividend yields worth holding are Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ).
All four banks have been good investments. NAB is my personal preference going forward.
However, I think IOOF Holdings Limited (ASX: IFL) would be a better choice for investors for the following reasons:
- IOOF isn't reliant on lending huge sums of money to homeowners with increasingly harrowing debt ratios.
- IOOF isn't at the mercy of additional capital requirements or bank levies that have been implemented in recent times.
- IOOF is much closer aligned to the large potential growth of the superannuation pool of assets than the big banks. Advice and administration is big business for IOOF and should grow strongly over the next decade.
- IOOF has a grossed-up dividend yield of 6.39%, which isn't too far from the banks' yields.
Foolish takeaway
I don't think IOOF is the best blue-chip finance share on the ASX, that honour belongs to Challenger Ltd (ASX: CGF) in my opinion.
However, I do think there's a decent amount to like about IOOF over the four big banks. IOOF is currently trading at 21x FY18's estimated earnings.
