Is the Australia and New Zealand Banking Group (ASX: ANZ) share price a buy today for dividends and capital growth?
The ANZ share price is lower than was six months ago. Compared to the share price on 1 April 2010, ANZ's shares haven't changed much. A lot has gone on since the start of the last decade – a property boom for most of the 2010s, a financial services royal commission and some divestments.
ANZ is now a business that's more focused on Australia and New Zealand and it's now a business more focused on lending. Indeed, ANZ could soon lose another small part of its earnings if the RBA gets its way.
Sadly for Australian ANZ shareholders, they saw the level of franking for the latest dividend reduce because of the composition of ANZ's earnings. More of ANZ's taxable earnings is now generated outside of Australian than before.
ANZ now has a low double digit price/earnings ratio. That looks cheap, particularly compared to the prices of most other industries. But I don't want to buy a share for a month or even just a year in mind. If a business isn't growing earnings faster than inflation then why take on all of the equity risk for a business that's struggling?
The higher capital requirements of regulators in Australia and New Zealand could see ANZ's profitability reduce further with it already being difficult to make good money because of a lower net interest margin (NIM) due to lower RBA interest rates.
Foolish takeaway
The dividend seems like the only good reason to consider ANZ shares. It has a grossed-up dividend yield of 8% – not bad in this environment but it's not something I'm attracted to. I'd much rather choose a dividend share which has more growth potential than ANZ.
