Is the Macquarie dividend going to beat a bank savings account?

Can Macquarie's dividends beat its own term deposit rates?

| More on:
A businesswoman weighs up the stack of cash she receives, with the pile in one hand significantly more than the other hand.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Macquarie has been generous with its dividend payments in the past few years
  • But interest rates have been rising, awakening cash investments as an alternative to dividends
  • So how does Macquarie's dividend stack up against cash these days?

Are the dividends from Macquarie Group Ltd (ASX: MQG) shares going to beat a savings account here as we stand in September 2022?

That is a very good question. For years now, dividends were almost always going to give an investor a higher yield than what could be achieved through a savings account. That's what record low interest rates, which got down to a paltry 0.1%, result in.

But in 2022, times have changed, and rapidly at that. This week saw the Reserve Bank of Australia (RBA) increase the cash rate for the fifth consecutive month in a row. The cash rate was 0.1% at the start of the year. Now it stands at 2.35%. That changes the game when it comes to cash investments like savings accounts and term deposits.

So let's circle to the Macquarie dividend. July saw Macquarie fork out its last dividend, a final payment worth $1.40 a share. Unusually for Macquarie, this came fully franked. This was a substantial drawdown from FY21's final dividend. This was worth a whopping $3.35 per share, partially franked at 40%.

Together with Macquarie's December interim dividend of $2.72 per share (also partially franked at 40%), Macquarie shares today have a dividend yield of 3.49%.

So how does this dividend yield compare to what an investor can expect from a savings account or term deposit today?

How do Macquarie's dividends stack up to cash today?

Well, it's certainly competitive. As we covered earlier this week, the highest savings accounts in Australia currently offer interest rates of just over 3%. The highest of these is presently 3.6%.

Saying that, accounts offering these kinds of interest rates usually come with conditions. These include minimum transaction thresholds, regular deposits, and requirements that no funds are withdrawn if investors are to receive the top rates.

When it comes to term deposits, higher rates still are available to investors. If savers are willing to lock their money away for more than 12 months, rates up to 4.4% are currently available. Macquarie's own term deposits currently go up to a maximum interest rate of 3.65%. That's slightly above its present dividend yield.

Something else to consider as well. Rates have just been hiked by another 0.5% as of this week. As is often the case with the ASX banks, this latest hike has yet to fully flow through to banks' savings products.

So even if the RBA doesn't raise rates next month, we could see even higher rates still on Australian savings accounts and term deposits in the next few weeks and months.

For years, dividends had the upper hand on cash investments. But it looks like the tide may finally be turning.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

A happy male investor turns around on his chair to look at a friend while a laptop runs on his desk showing share price movements
Dividend Investing

Brokers name the ASX dividend shares to buy now

Let's see what they are saying about these income options.

Read more »

Different Australian dollar notes in the palm of two hands, symbolising dividends.
Dividend Investing

This 5% monthly dividend stock is a cash flow machine

If you want monthly passive income, check out this stock.

Read more »

A woman presenting company news to investors looks back at the camera and smiles.
Dividend Investing

Broker names the best ASX dividend shares to buy now

Let's see why the broker is feeling bullish about these income options.

Read more »

A cute little kid in a suit pulls a shocked face as he talks on his smartphone.
Dividend Investing

Up 38% in a year, is it too late to buy Telstra shares for the dividends?

A leading expert gives his verdict on Telstra’s passive income appeal following the stock's 38% 12-month share price gains.

Read more »

A young woman dressed in street clothes leaps happily in the air with the focus on her bright red boots that are front and centre for the camera.
Dividend Investing

This ASX dividend share is projected to pay a 10% yield by 2028

Analysts are expecting big payouts from this business.

Read more »

A couple sits in their lounge room with a large piggy bank on the coffee table. They smile while the male partner feeds some money into the slot while the female partner looks on with an iPad style device in her hands as though they are budgeting.
Dividend Investing

Want to turn $20K into a $1K second income? Here's how

ASX shares can pay you upfront for buying them...

Read more »

A man and woman sit next to each other looking at each other and feeling excited and surprised after reading good news about their shares on a laptop.
Dividend Investing

2 ASX dividend shares I think are great value today

These two stocks offer a lot of what I’m looking for.

Read more »

Excited couple celebrating success while looking at smartphone.
Dividend Investing

Buy Woodside and these ASX dividend stocks

Brokers have put buy ratings on these dividend payers.

Read more »