Bendigo and Adelaide Bank Limited (ASX: BEN) is often the forgotten Australian bank but just like its better-known peers, the bank tends to offer dividend-hungry shareholders a very lucrative alternative to falling term deposit rates.
Australia’s 5th Retail Bank
Bendigo and Adelaide Bank was formed following the merger of Bendigo Bank and Adelaide Bank in November 2007. The bank operates primarily within the retail banking space and has a network of more than 500 branches and agencies across Australia, predominantly on the east coast and South Australia.
Bendigo Bank has done a wonderful job marketing itself as the ‘community bank’ which has resonated with customers who tend to turn their nose up at the bigger banks.
How The Dividend Stacks Up
Bendigo and Adelaide Bank shares currently trade with a trailing dividend yield of 6.1%. This is supported by very healthy cash profits and compares favourably against two of its biggest peers, Australia and New Zealand Banking Group (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA) which trade on a dividend yield of 5.9% and 5.3% respectively.
What About The Slowing Economy?
Depending on who you listen to, you could range from very optimistic to disturbingly pessimistic when it comes to the economic outlook for Australia. Cooling house prices, stagnant wage growth, eye-watering debt levels and wavering confidence are all potential headwinds for the economy generally and the banks more specifically. However, the recent tax cuts along with the lowering of the RBA cash rate may provide the impetus the economy needs to continue its march onwards and upwards.
With term deposit rates crashing to all-time lows bank shares are a favourite for investors looking for potential dividend income. Maybe its time we broadened the discussion to include Australia’s oft-forgotten retail bank?
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Disclosure: At the time of publishing, Luke has no financial interest in any companies mentioned.