I'd buy this ASX bank share for dividends over CBA

Earnings and dividends from this bank are more appealing to me.

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If I were going to buy an ASX bank share for dividends, I'd choose Macquarie Group Ltd (ASX: MQG) shares over Commonwealth Bank of Australia (ASX: CBA) shares.

Both businesses have strong positions in their respective categories. They're good businesses.

What I like about Macquarie shares

CBA is the biggest bank in Australia, with a significant market share of lending to households and businesses.

Macquarie also has a sizeable banking and financial services (BFS) division. This area is very competitive, with so many lenders competing for the same borrowers and depositors. We've probably already seen net interest margins (NIM) peak, with competition pushing down on the NIM.

Macquarie has global operations across its Macquarie Asset Management (MAM), investment banking, and commodities and global markets (CGM) divisions. The ASX bank share earns more than two-thirds of its profit outside of the local economy, which is something CBA can't claim.

This gives Macquarie more earnings diversification today and greater flexibility to invest in different areas for more long-term growth. CBA is largely stuck with lending to Aussies and New Zealanders to make a profit, while Macquarie has so much choice to make the best returns.

I think Macquarie has delivered stronger growth and can grow more in the coming years. Over the past decade, the Macquarie share price is up more than 220%, while CBA shares have lifted by just over 40%.

The Macquarie share price looks much more compelling to me. According to Commsec, the CBA share price is valued at 19x FY26's estimated earnings, while Macquarie shares are valued at under 15x FY26's estimated earnings.

Dividend comparison

CBA's dividend yield may be larger in the short term, but I believe Macquarie's solid profit growth and profit re-investment can lead to stronger dividend growth over time and eventually pay a larger yield, making it my preferred ASX bank share.

Looking at the dividend projections for FY26, Macquarie could pay a partially franked dividend yield of 4.2%, and CBA might pay a fully franked dividend yield of 4.1%.

If Macquarie can grow earnings faster than CBA, I think it can provide better dividends over the long term and much stronger capital growth.

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

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