Australian investors who buy ASX bank shares like ANZ Group Holdings Ltd (ASX: ANZ) usually do so in the hopes of securing a large and preferably fully-franked upfront dividend yield.

That's fair enough. After all, all four of the major banks have a proven track record of supplying ASX investors with healthy levels of passive income for decades – dividend income that usually comes with full franking credits attached.

That used to be the case with ANZ too. Yet, over the past few years, the dividends from ANZ, in particular, have started to look quite different.

To answer the headline question, no, ANZ's dividends do not still come fully franked.

The last time ANZ paid out a fully franked dividend was back in July 2023. At the time, shareholders received a fully franked interim dividend worth 81 cents per share.

The next dividend this bank stock paid, the final dividend from December 2023, was only partially franked at 56%.

It seems that this pattern has now taken hold. In 2024, ANZ paid out an additional two dividends, both with only partial franking credits attached.

The interim dividend that investors saw in July of last year was worth 83 cents per share, but it was only partially franked at 65%. Last December's final dividend, also worth 83 cents per share, was franked at 70%.

So what's going on here? After all, ANZ's peers in the big four stable have all continued to pay fully franked dividends over 2023 and 2024 (and into 2025 in Commonwealth Bank of Australia (ASX: CBA)'s case).

Why aren't the dividends from ANZ shares fully franked?

To answer that question, let's first recap how an ASX 200 share is able to distribute franking credits. Franking credits are, in effect, a receipt of sorts that reflects the tax that a company has paid to the Australian government.

They were implemented to ensure that dividends are not taxed twice by the time they arrive in an investor's bank account. That's once at the corporate level and once at the personal level.

If a dividend comes from a pool of already-taxed money, the company can pass on franking credits to reflect this. The shareholder can then claim back when they file their tax returns.

ANZ, unlike its peers, has significant international banking operations. The profits from these offshore divisions are often taxed in the country from where they were derived. As such, these profits do not generate franking credits which ANZ can then pass on.

Here's what the bank itself tells investors about its partially franked dividends:

The franking proportion of the dividend reflects the geographically diverse nature of ANZ's business in particular the proportion of our profit that's generated outside of Australia and therefore does not generate Franking Credits…

ANZ will continue to maximise the distribution of franking credits to our shareholders as they are more valuable to you than to ANZ.

Interestingly, the bank also noted that "the completion of the Suncorp Bank acquisition (end of July 2024) will assist with the generation of Franking Credits over time". As such, it will be interesting to see how much of ANZ shares' upcoming interim dividend (which we can presumably expect in July), will be franked.

Foolish takeaway

Although most investors would prefer to see fully franked dividends from ANZ shares, bear in mind that the ANZ dividend yield is usually one of the highest in the ASX banking sector. This perhaps reflects the lack of full franking, with the market adjusting the yield to reflect this.

At current pricing, the ANZ share price is trading on a dividend yield of 5.72%.