As we approach 2017, it seems Commonwealth Bank of Australia (ASX: CBA), National Australia Ltd. (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX:WBC) have multiple ways to win.
Indeed, despite a large amount of media scrutiny the banks continue to prosper. And thanks to a mostly lacklustre share price performance in 2016, it could be time to consider owning Commbank, Westpac, NAB and ANZ shares in 2017.
3 reasons to buy Commbank, Westpac, NAB and ANZ shares in 2017
- Big dividends. This one is obvious. The major banks offer stellar dividends to shareholders. At 6.5% fully franked, NAB's forecast dividend yield is the largest of the big four. However, even Commbank's forecast 5.2% fully franked dividend yield is nothing to turn your nose up at.
- Modest growth. I think much of the return from holding bank shares in 2017 will come in the form of dividends. However, despite a subdued economic outlook in the near term, long-term shareholders could expect modest growth over time. With cost reductions a major focus for the banks their profits could move higher over the next three to five years.
- Tailwinds. Over the past few years, the banks enjoyed a strong boost to their loan books as house prices surged. While property prices may not increase at the same rate, a robust economy continues to offer a stable long-term tailwind for the banking sector. For example, higher interest rates may lead to higher delinquencies, but they are likely to widen profit margins.
Buy, hold or sell?
Australia's big banks have established an enviable track record of growth in dividends and share prices. I am not expecting that trend to stop anytime soon.
Of course, their share prices will rise and fall throughout the market cycle. But if the banks can embrace technology and continue their cost outs there may be room for growth.
At today's prices however I think the banks are not a standout buy. Therefore, you may want to wait for lower prices before buying in.
