One of the biggest reasons “mum and dad” investors flock to Australian bank shares is the bumper dividends: the billions of dollars paid out to hundreds of thousands of shareholders every six months.

The big four banks between them paid $23 billion to investors big and small last year, and they account for almost 30 per cent of all dividends on the ASX 200. In our market, only mining titans – BHP and Rio Tinto – rival the big four for how much money they shower on their shareholders.

Bank shares are known for their dividends, but some analysts say these payments are unsustainable.Credit: Dominic Lorrimer

These torrents of cash have made bank shares the bedrock of many small investors’ portfolios, especially those investors who want income from their shares, such as retirees.

However, the latest round of bank profit results sparked a genuine discussion about whether banks can keep the dividend cash flowing at this rate (with the exception of CBA, whose dividend is seen as safer). Some veteran bank-watchers are asking: do some of our biggest banks need to cut their highly prized dividends?

Such cuts would be unusual if they occurred outside a recession – which is normally what causes banks to reduce dividends – but not unprecedented. National Australia Bank cut its dividend in 2019 under acting chief executive Phil Chronican as it emerged from a bruising banking royal commission that left it with higher costs and........

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