ANZ at $35: two clear ways to value the share price

ANZ shares trade near $35 as investors wait for the bank's half-year results due before May's end. The dividend yield sits at roughly 4.7%, above the ASX 200 average but below the 6% peak reached in 2020. For yield-focused holders, the question is whether that is enough.

One approach is to check dividend sustainability. ANZ paid $1.66 in dividends over the past year, covered by earnings of about $2.50 per share. The payout ratio of 66% leaves room for growth if profits rise. The risk is that falling net interest margins could compress earnings and make the payout less secure.

A second approach is the price-to-earnings ratio. ANZ trades at roughly 14 times trailing earnings, a discount to the ASX 200's 17 times. A smaller discount would signal more downside risk baked in. A larger discount could attract value buyers.

Both methods suggest ANZ is neither obviously cheap nor expensive at $35. The upcoming half-year results will provide the next hard data point. Net interest margin trends and loan growth will tell investors whether the current yield is sustainable or at risk.

ANZ's next major catalyst is the half-year report, due before May 31. That print will give the market a clearer read on the bank's earning power and dividend prospects.