16 July 2012 6:56am

Citi Research has upgraded ANZ and Commonwealth to a Buy because they offer sustainable dividends and attractive yields.

Citi’s view, in a report issued in Friday, is that dividend sustainability has taken on greater importance for investors in an environment where there is little prospect of significant capital gain.

Citi said that "the bank sector’s forward dividend yield of 7.3 per cent currently exceeds 10-year government bonds by a margin of 4.4 per cent."

Citi applied a stress test to the major banks to see how their dividends would hold up under a seven per cent...