Treasure Chest: Bank Divs And A Thirteen Month Yield

This story features WESTPAC BANKING CORPORATION, and other companies. For more info SHARE ANALYSIS: WBC

By Greg Peel

There is no smoke and mirrors involved nor anything dodgy. The simple fact of the matter is that if you buy a stock (that pays two dividends per year) just before it goes ex-dividend and hold that stock for thirteen months you will then receive a total of three dividends. Three dividends over thirteen months provides for a much better yield than two over twelve. And if you ask which are the most popular yield stocks in the market right now, right up there are the Big Four banks.

Of the four, three are about to go ex-div. Commonwealth Bank ((CBA)) is on a different cycle but ANZ Bank ((ANZ)) goes ex-div on May 9, Westpac ((WBC)) on May 13 and National Bank ((NAB)) on May 30.

RBS Morgans is forecasting a 2.3% increase in ANZ’s interim over last interim, to 68cps. The analysts’ forecast for the total of all next three dividends is $2.19ps, or a 7.6% cash yield. That’s a 7.0% per annum yield over thirteen months compared to the twelve month yield of 5.2%*.

RBS is expecting a 2.4% increase in Westpac’s dividend to 84cps, and a total for three divs of $2.65. That’s an 8.4% yield over thirteen months or 7.8%pa, compared to a twelve month yield of 5.5%.

The NAB increase is expected to be 2.2% for 90c and a total of $2.79. That’s 8.8% over thirteen months or 8.1%pa compared to 5.9%.

On a net of all three banks, that’s an 8.3% yield over thirteen months, or 7.7%pa against 5.5%.

These are cash dividends. Then one has to add the gross-up yield benefit of full franking, which differs depending on one’s tax situation.

* Twelve month yields based on FNArena database consensus FY13 forecasts.
 

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