The Australia and New Zealand Banking Group (ASX: ANZ) share price is having a great day today. At the time of writing, ANZ shares are up 1.14% to $19.53. Sure, this ASX bank is still down more than 20% year to date and is trading at the same levels as it was back in September 2011. But it's also up close to 40% from its March lows if we try and stay on the bright side of life.
So seeing as ANZ is still looking relatively cheap from a historical standpoint, is the ANZ share price a buy today?
A cheap ASX banking share?
Looking at how ANZ is being priced right now, I do think a deep look into the company is merited. With a price-to-earnings (P/E) ratio of 13.3 on current pricing, ANZ is the cheapest ASX bank out of the big four. In contrast, Commonwealth Bank of Australia (ASX: CBA) is currently on a P/E ratio of 17.15, National Australia Bank Ltd (ASX: NAB) is on 17.48 and Westpac Banking Corp (ASX: WBC) is on 14.17.
But no one buys ASX bank shares on P/E alone (at least that I know of), so let's drill down to the real reason ASX investors tend to go for banks: dividend income.
As you might know, 2020 has been a truly dismal year for ASX bank shareholders. Not only have the banks' share prices been smashed this year, the once-plentiful dividend streams have flirted with the way of the dodo.
Are ANZ shares an ASX dividend buy today?
Unlike Westpac, ANZ has actually paid a dividend in 2020 – a fully franked 25 cents per share interim dividend that was paid out last month. However, this does pale in comparison to the double set of 80 cents per share payouts that ANZ investors received last year.
That's not entirely ANZ's fault. The banking regulator APRA has 'instructed' ASX banks to limit their dividend payouts to 50% of their earnings in order to maintain the stability of the financial sector. The 25 cents per share ANZ dividend represented approximately 46% of the banks' earnings, so we can't really blame ANZ for that one.
But what of the future?
Well, if we assume ANZ is able to pay two 25 cents per share dividends in 2021, it would indicate a forward dividend yield of 2.56% (or 3.66% grossed-up if fully franked). If APRA lifts this dividend cap, and ANZ manages to keep earnings stable next year and pays out 75% of its earnings (as was common pre-2020), you could expect a rough forward yield of 3.85%. But take that with a handful of salt, because there are a lot of variables there.
Foolish takeaway
Looking at ANZ, I can't help but think that there are better options for dividend income on the ASX out there today. Sure, a 2.56% yield isn't nothing. But personally, I would rather go with one of the many ASX dividend shares out there with more certain futures, and higher yields today.