Shares of National Australia Bank Ltd (ASX: NAB) have fallen over 13% during the past three months, on the back of a record capital raising and general market malaise.
Following an ok half-year profit result, the under-performing NAB finally began to undertake a long-awaited strategic transformation.
Three reasons to keep NAB on your watchlist
While NAB shares mightn't be a standout buy right now, here are three reasons why they deserve to be on your watchlist:
- Dividends. In a low-interest rate environment, NAB's 5.8% fully franked dividend yield presents as a very attractive payout. Whilst some analysts have questioned its ability to pay a rising dividend in coming years, even if it holds flat at $1.98 per share its payout will be in demand from yield-hungry investors.
- NAB has become known as the serial underperformer among the 'Big Four' Australian banks. Indeed, its profitability is lacklustre and its overseas exposure has proven troubling. However, the latter problem has now been dealt with. Under CEO Andrew Thorburn NAB will divest its troubled UK bank, Clydesdale, following the successful sale of its US Bank, Great Western Bancorp.
- Using relative measures of value, such as the price-earnings and price-book ratios, NAB shares appear cheap. However, in absolute terms NAB shares are trading above my fair value estimate of around $31. Unless NAB shares drop significantly below this level investors should keep it out of their portfolios and on their watchlists.
A better dividend stock than NAB
