Commonwealth Bank of Australia (ASX: CBA) is Australia's largest bank and the best-performing 'Big Four' bank stock of the past decade.
The chart above shows the share price performance of the Commbank, Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ). As can be seen, Commbank shares have materially outperformed those of its peers — even before we take into consideration dividends paid.
1 obvious reason to own Commonwealth Bank of Australia shares in 2017
Providing the fuel for Commbank's share price has been the non-stop growth of the Australian economy and house prices, enabling it to post higher and higher profits. Commbank is Australia's largest provider of mortgages.
However, past share price performance or its housing market domination is not the best reason to own Commbank shares, in my opinion — it is its dividend.
Commbank shares are currently forecast to pay a dividend of $4.23 in the year ahead. Fully franked, that is a gross yield of around 7%.
Now, you might be saying that shares of the other banks are offering bigger dividend yields. You would be right.
However, Commbank's dividend has grown rapidly over many years. In fact, since 1991 the bank's dividend has grown from just 40 cents per share — when its share price was changing hands around $6.
If you are a long-term investor (five years plus) growth in a dividend is one of the best ways to build your wealth.
Buy, Hold or Sell
At today's prices of $84 per share, I think Commbank shares are a little too expensive to justify an investment. Indeed, while I think it is the best big bank share — and I would like to own it in 2017 — investors should wait for its share price to come back.
