The year 2020 has not been kind to ASX bank shares. Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking GrpLtd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) share prices are all still between 20-30% below where they started the year. Commonwealth Bank of Australia (ASX: CBA) is something of a saving grace, but even the yellow diamond is down more than 11% year to date, and more than 22% down from its February peak.
What's happened?
A chief reason why these shares have been smashed in 2020 is dividends – or more specifically a lack thereof. When the coronavirus pandemic became apparent, it was quickly obvious that the banks' capacity to pay dividends in 2020 would be strained. Even before the pandemic emerged, the banks were struggling on this front. It seems like a lifetime ago now, but CBA was actually the only ASX bank not to cut its dividend or franking in 2019.
But 2020 has been a whole different ballgame.
In the midst of the initial wave of the pandemic, NAB was the only ASX bank to offer any dividends – a 30 cents per share interim payment that was partially funded through a capital raising. ANZ and Westpac decided to defer the decision on dividend payments, whilst CBA paid out its interim dividend of $2 per share back in February.
Back to the present, and ANZ has decided to pay a 25 cents per share dividend (a substantial decrease from the 80 cents per share investors have been accustomed to). CommBank has announced a final dividend of 98 cents per share (down from $2.31 last year), whilst Westpac has scrapped its interim payment altogether.
So, now all of the banks have dealt their cards, which is the best bank for ASX dividend income?
And the banking winner is…
Well, firstly, it's difficult to judge the ASX banks on the dividends paid this year alone. NAB did offer 30 cents per share in the midst of the crisis when uncertainty forced Westpac and ANZ to defer their own payments. If the picture was as clear as it is today back in March (relatively speaking), NAB might have offered shareholders more.
But on the face of it, I think we have to give CommBank the crown here. Commonwealth Bank has proven it can fund a substantial payout (again, relatively speaking) without having to launch a capital raise. If CBA's 98 cents per share dividend is annualised, it works out to be a 2.76% yield on current pricing. If we take NAB's 30 cents per share and ANZ's 25 cents per share, it equates to a yield of 3.35% and 2.67% respectively for comparison.
Even though NAB looks to be offering a higher yield on paper, I would still prefer CBA if I were desperate to add a bank share to my portfolio today.
