Bank stocks: It’s all about dividends now

Banks' stock prices will continue to face pressure, but they are excellent dividend payers and that may soon become their greatest strength.

Summary: Bank shares have fallen recently on the back of the lower Australian dollar, global instability and worries about exposure to an inflated housing market. Banks’ profitability faces the headwinds of new competitors, a possible correction in the housing market and the threat that they will be required to hold more capital. It is unlikely that banks will repeat the profit growth of recent years – they will increasingly become income-producing utilities.

Key take-out: Enjoy the banks’ dividends … but don’t look too closely at their share prices.

Key beneficiaries: General investors. Category: Shares.

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