Here’s why the ANZ share price could be a good value pick for dividends

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price could be at a good value to consider the ASX bank share for dividend income.

ANZ is one of the biggest banks on the ASX, along with Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Commonwealth Bank of Australia (ASX: CBA).

ANZ wants to become even bigger by buying the banking division of Suncorp Group Ltd (ASX: SUN).

In terms of the dividend income, let’s have a look at what the bank may be able to achieve.

Dividend estimate for ANZ shares

According to Commsec, ANZ will pay an annual dividend per share of $1.54 in FY23. This would translate into a grossed-up dividend yield of 8.9%.

It’s estimated that ANZ may pay an annual dividend per share of $1.60 per share in FY24. If the ASX bank share were to pay this, then it would translate into a grossed-up dividend yield of 9.3%.

This compares well to the estimated yield CBA might pay in the next couple of years. In FY23, CBA could pay a grossed-up dividend yield of 5.7%, and then in FY24, the biggest bank could pay a grossed-up dividend yield of 6%.

Why ANZ could be a good pick for investment income

Things seem to be looking up for ANZ.

The FY22 result included attractive amounts of growth. Statutory net profit after tax (NPAT) increased by 16% to $7.1 billion, while continuing operations cash profit grew by 5% to $6.5 billion. The annual dividend per share increased by 3% to $1.46 per share.

FY22 gross loans and advances went up 7% to $676 billion, while customer deposits increased 5% to $620.4 billion.

ANZ also said that it had restored momentum in Australian home loans, with application approval times back in line with peers.

ANZ also told investors about how much profit it could make from higher interest rates.

Compared to FY22, ANZ expects FY23 to see an additional $1.5 billion net interest income earned. In FY25, the additional net interest income could amount to $3.2 billion. In my opinion, this could be very beneficial for the ANZ share price.

I think that the ASX bank share is interesting in this context of higher earnings.

I’m not sure how high the Reserve Bank of Australia (RBA) interest rate will go, but it’s proving to be a boost for the bank. As long as the interest rate doesn’t go too high, the loan book may not suffer too much from elevated arrears.

It looks quite cheap

Despite the potential for increasing profit, the ANZ share price is actually down by more than 10% in 2022.

Currently, it’s valued at 10x FY23’s estimated earnings and 10x FY24’s estimated earnings.

While the price/earnings (p/e) ratio isn’t everything, it allows us to compare it against other businesses.

According to CBA, it’s valued at 19x FY23’s and 18x FY24’s estimated earnings. I think that ANZ shares look cheap when considering CBA’s valuation.

The post Here’s why the ANZ share price could be a good value pick for dividends appeared first on The Motley Fool Australia.

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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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. 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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