Australia's major banks have long been favourites among income investors.
That's not hard to understand. The big four have historically generated strong profits, paid out a large portion of earnings as dividends, and offered franking credits that can boost after-tax returns for local investors.
For many portfolios, bank shares have been a reliable source of income.
However, it's worth noting that the sector's strong share price performance over the past couple of years has had an impact. As share prices rise, dividend yields naturally compress, which means investors today are generally getting lower yields than they might have a few years ago.
With that in mind, let's take a look at how the major banks stack up right now based on consensus estimates according to CommSec.
Commonwealth Bank of Australia (ASX: CBA)
CBA shares ended yesterday's session at $173.18.
Consensus estimates currently predict fully franked dividends of $5.20 per share in FY26 and $5.50 per share in FY27 from Australia's largest bank. That equates to dividend yields of around 3.0% for FY26 and 3.2% for FY27.
While that is the lowest yield among the big four, it reflects the bank's premium valuation. Investors have historically been willing to accept a lower yield in exchange for what many consider to be the highest-quality banking franchise in Australia.
National Australia Bank Ltd (ASX: NAB)
NAB shares were trading at $42.56 at Thursday's close.
CommSec's consensus estimates point to fully franked dividends of $1.76 per share in FY26 and $1.82 per share in FY27. This implies dividend yields of approximately 4.1% and 4.3%, respectively.
That places NAB in the middle of the pack.
Westpac Banking Corp (ASX: WBC)
Westpac shares last traded at $40.46.
The bank is expected to pay fully franked dividends of $1.56 per share in FY26 and $1.60 per share in FY27. Based on those estimates, Westpac offers dividend yields of roughly 3.9% for FY26 and 4.0% for FY27.
Like NAB, this positions it as a relatively solid income option, though not the highest in the group.
ANZ Group Holdings Ltd (ASX: ANZ)
Finally, ANZ shares last traded at $36.65.
According to CommSec, the bank is expected to pay partially franked dividends of $1.68 per share in FY26 and $1.72 per share in FY27. That puts its forward dividend yield at roughly 4.6% for FY26 and 4.7% for FY27.
The partial franking is worth keeping in mind, as it can affect after-tax income compared to fully franked alternatives.
ANZ is the ASX bank with the biggest dividend yield
Based on current consensus estimates, ANZ offers the highest forecast dividend yield among the big four banks.
However, the difference is not especially large, and it comes with the trade-off of only partial franking.
Foolish takeaway
ANZ may currently offer the highest forecast yield, but its partial franking means the after-tax outcome may not be as straightforward when compared to fully franked alternatives like CBA, NAB, and Westpac. At the same time, CBA's lower yield reflects the premium the market places on its quality and consistency.
In my view, the banks can still provide attractive and relatively reliable income, but the best choice will depend on whether you prioritise yield, franking, or overall business quality.
The post Which ASX bank has the biggest dividend yield? appeared first on The Motley Fool Australia.
Motley Fool contributor Grace Alvino has positions in Commonwealth Bank Of Australia. 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 no position in any of the stocks mentioned. 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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