NAB or ANZ: Which Big Four Bank Offers Better Income Potential?

The big four banks are perennial favorites among Australian investors seeking income. Two of them, National Australia Bank (ASX: NAB) and ANZ Group Holdings (ASX: ANZ), stand out for their substantial dividends and long history of rewarding shareholders. To determine which one is the better investment choice for income seekers, let's break down the data.

National Australia Bank boasts a market capitalization of $120.37 billion, slightly higher than ANZ's $115.06 billion, making it one of the country's largest listed firms. Its dividend yield sits at 4.39%, with dividends fully franked at 100%. NAB's dividend history is both long and consistent, with recent annual dividends per share reaching $1.70.

ANZ Group Holdings also has a strong anchor in Australia and New Zealand, serving over 8.5 million customers across nearly 30 markets. Its market cap is lower than NAB's, but its dividend yield of 4.36% is virtually identical to NAB's. However, ANZ's dividends are only partially franked (most recently at 75%), which could result in less after-tax income for Australian investors.

When it comes to valuation comparison, both NAB and ANZ trade on similar valuations. However, NAB offers slightly higher dividends, fully franked, while ANZ's payout is almost the same dollar amount but only partially franked. Their P/E ratios and EPS numbers are effectively matched, suggesting the market prices them on similar expectations.

Looking at share price activity until 22 September, ANZ has delivered solid positive momentum this year, with a year-to-date return of 6.9%. In contrast, NAB's year-to-date return is -6.5%, reflecting a moderate downturn over the same period.