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Time to think about bank dividends

With the market pulling back around 3.5% off its recent highs it provides investor an opportunity to buy on weakness. Overnight Ben Bernanke made comments about the fact that the labour market in the US would need to continue to improve rather than just show "temporary improvement" for the Fed to consider reducing their assets purchasing program.

In Australia, we have seen the RBA drop rates to the current level of 3% however recent data points including the employment data has seen the market take future cuts out of the market with only around 10bps priced in to the market through to the end of the year.

With investors looking to chase yield, investors have been looking away from term deposits to take on more risk and higher yield stocks on the Australian share market.

There has been a good run up in dividend paying stocks over at least the last 2 years with recent stock examples of CBA and TLS outperforming the market.

In May WBC, NAB and ANZ are all expected to go ex dividend which provides investors opportunity to extract a dividend and franking credit that far outweighs current term deposit rates (NAB div yield is 4.22% fully franked based off $0.90 dividend vs 4.10%pa or 2.05% for 6 months).

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Contact an Morgans Chermside adviser for more information.