ASX bank stocks, particularly the big four, have always been popular investments for those Australian investors seeking franked dividend income.
All the banks listed on the ASX have paid relatively large dividends for decades. Additionally, names like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) have been familiar brands for Australians for more than a century. Given the importance of the role these companies play in daily life in this country, many investors have no problem investing their hard-earned dollars into these institutions in the hope of receiving a hefty stream of regular passive income.
Although you can count the number of bank stocks on the ASX with two hands, there still might be some investors out there today who can't decide which is the right choice for an income investment in 2026.
So today, let's go over which ASX bank stock I would pick for a dividend investment right now, and why.
Which ASX bank stock to buy for dividends in 2026?
To start off with, I would rule out the non-big-four banks.
The likes of Bank of Queensland Ltd (ASX: BOQ) and Bendigo and Adelaide Bank Ltd (ASX: BEN) do offer what looks like compellingly high dividend yields right now, that also come with full franking credits attached. Both currently trade on yields north of 6%.
However, as we discussed recently, these banks do not sit on the same stable foundations that are enjoyed by their big four cousins. They simply cannot offer the same size, scale and strength to investors. This is reflected in their profits, share price trajectory, and historically inconsistent dividend payouts.
So they're out.
I'll also exclude Macquarie Group Ltd (ASX: MQG). It is often debated whether to even describe Macquarie as an ASX bank. It does have a banking division. However, the lion's share of its earnings derives from other sources such as asset management and investment banking. Macquarie's dividend yield is relatively low at well under 3% today. Additionally, Macquarie's dividends do not usually come franked to a meaningful level. So it's out too.
That leaves the big four.
Sticking with the big four
Right off the bat, I'm ruling out CBA. CBA is our largest and arguably best ASX bank stock. However, as I've written about many times, it is very expensive for a bank, even after its lacklustre 12 months. Its dividend yield, presently just over 3%, doesn't make it a compelling income investment in my view.
Although ANZ currently offers the best yield of the big four right now, at 4.8%, it falls short in a crucial arena: franking. For years now, ANZ's dividends have only come partially franked. The bank's last two payouts came from to 75% and to 70% respectively.
As such, I think Westpac and NAB are the better dividend investments right now. There is not much separating these two ASX bank stocks. Both have a habit of funding fully-franked dividends. And Westpac and NAB are currently trading on yields of 4.35% and 4.45% respectively.
Of those two, my first choice for income would be NAB.
NAB's business banking division puts it ahead of the pack, whilst Westpac is, in my opinion, overexposed to the property market. Plus, NAB currently offers the higher dividend yield, for what that's worth.
The post This is the ASX bank stock I would buy today for franked dividend income appeared first on The Motley Fool Australia.
Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Bendigo And Adelaide Bank. The Motley Fool Australia has recommended Macquarie Group. 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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