The Commonwealth Bank of Australia (ASX: CBA) share price has gained 15% since reaching a low of $69.50 in September.
3 reasons to own Commonwealth Bank of Australia shares
Commbank shares form the foundation of many investors' portfolios. Partly because it has performed exceptionally well over the past decade and partly because investors are falling over themselves to get a taste of its dividend.
But if you have more than 10% of your Australian share portfolio in Commonwealth Bank shares, I think it is too much. In fact, if it makes up 10% of your entire (global and local) share portfolio that would be too much. Heck, if your total bank exposure made up more than 25% of your investments, don't buy any more.
My point is, even though I think Commbank shares may be a good stock to hold in 2017, please, don't put all your eggs in one basket — diversify!
Now that the warning is done, here are three reasons to consider owning Commbank shares:
- A big dividend – Commbank shares are forecast to yield a dividend equal to 5.2% fully franked. That's impressive.
- Relative safety – Commbank is the biggest bank in Australia and also the biggest company. Worth $139 billion, the perceived safety of Commbank shares is second to none.
- Long-term growth – The bank is well-funded with deposits, has a leading market share of key products (e.g. mortgages) and is the most technologically advanced of its peers. I think that puts it in good stead for future growth.
Foolish takeaway
If you are overexposed to Commbank shares, I don't suggest buying more. But if you are seeking a quality dividend share to hold for many years and through the ups and downs of the sharemarket, I think Commbank is worth owning. I'd look to buy shares below $70.
