Australia and New Zealand Banking Group Ltd (ASX: ANZ) has just reported its FY22 result for the 12 months to 30 September 2022. Shareholders also learned about the ANZ dividend announcement.
Many investors may be interested in what the bank decided to do with its dividend.
With many banks valued on a relatively low price-to-earnings (P/E) ratio – the valuation multiple of their earnings – it means that many banks have high dividend yields.
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ANZ dividend
The large S&P/ASX 200 Index (ASX: XJO) bank share decided to declare a final dividend of 74 cents per share. This represented a 2.8% increase compared to the final dividend from FY21 of 72 cents.
That brought the full-year dividend to $1.46 per share, which was an increase of 3% year over year.
The dividend payout ratio of its cash profit was 65% for the final dividend. The payout ratio was also 65% for the full year.
ANZ's board said:
The board considers that a final dividend of 74 cents per share is appropriate and is consistent with its stated target dividend payout ratio of between 60% and 65% (cash continuing, ex large/notable basis).
This is in line with statements made during the recent equity raising and applies to new ANZ shares issued as part of the process.
With an annual dividend of $1.46 per share, that means the ANZ share price currently offers a grossed-up dividend yield of 8.5%.
Outlook
The board of ANZ doesn't provide guidance about its expected dividend payment.
However, considering it's targeting a payout ratio of its earnings, we can see whether ANZ is expecting to grow profit, and this could imply dividend growth.
ANZ CEO Shayne Elliot said:
There is uncertainty ahead, however we have the business in good shape to withstand volatility. We also have a highly engaged workforce with a high-performance culture and I'm confident in our ability to continue to deliver for customers and shareholders.
He also referred to RBA data that shows total household balance sheets are "the best they have been for 15 years".
But Elliot said the next six months "will be testing", particularly for first-time homeowners who are only starting to build up their equity as well as those with less stable employment.
The net interest margin (NIM) improvement looks promising for ANZ. In the first half of FY22 its NIM – which shows how much profit the bank makes from lending – was 1.58%. It grew to 1.68% in the second half of FY22. The exit margin for the month of September 2022 was 1.8%, implying that lending profitability can rise in FY23.
It's possible, perhaps likely, that the Reserve Bank of Australia (RBA) interest rate could keep rising until inflation is under control, which may be able to help ANZ's lending margins further. There is also an "increasing mix of variable rate home loan flows", which have a higher NIM than the fixed rate loans over the past couple of years.
Foolish takeaway
ANZ is paying investors another large dividend in this result. If it can grow profit in FY23, then investors may well see a larger ANZ dividend in the new financial year.
