Since the divestment of the Clydesdale and Yorkshire Bank (CYBG PLC CDI 1:1 (ASX: CYB)), and 80% of the NAB Wealth life insurance business, management have argued that the National Australia Bank Ltd. (ASX: NAB) is now a reshaped business. It is apparently now simpler and one that is now focused on its Australian and New Zealand customers.
This is undoubtedly true, and with the NAB paying shareholders a fully-franked dividend of almost 6.4% at current prices, investors chasing yield must surely be buying shares like a thirsty cat laps milk at its saucer.
The NAB share price has risen 29% too since mid-2016 and it's hugely possible the above transactions have helped with sentiment surrounding the stock.
But here we are today, in mid-January 2017, and the question to ask now is what shareholders can expect from the bank over the next 12 months.
Management have refreshed its organisational structure and and are now advising shareholders they're a 'more customer-focused organisation'.
There have been some product developments and, as an example of its new focus, it was recently reported that the NAB will provide a low-cost SMSF administration service, in partnership with Heffron SMSF Solutions.
But I see this as merely a competitive response to the services already provided by Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group (ASX: ANZ), with only Westpac Banking Corp (ASX: WBC) lacking in this area.
Other than this, I can't see a great deal happening and, in the case of the NAB, this is a very good thing.
The number of times the NAB has tripped in its efforts to expand the bank internationally, or engage in 'business-transforming transactions' since the late 1990s, has left long-term shareholders weary and poorer as a result.
In my view, if you want to buy NAB shares today, I do believe you're buying a much better bank since its divestments. This is evidenced too by the NAB's Common Equity Tier 1 (CET1) ratio sitting at 9.8% (as at 30 September 2016) and above its target of between 8.75% – 9.25%.
But are adjectives of 'better' and 'safer' really what you should be looking for in a market-beating investment?
The yield is fantastic, especially when compared to what you would receive by placing your money within the NAB, but I believe that if you're to buy shares today, it will be the yield you'll be savouring at the end of 2017 with not too much capital gain.
The NAB's forecast earnings-per-share growth is expected to be around -2.5% for its 2017 year, and around 2% for 2018.
These are hardly the ingredients for a market-beating return if you were to buy at current prices.
Its price-to-book value now is 1.61x, which I find expensive when compared to other strong and steady dividend opportunities that are available in the market. Opportunities that you can read about by clicking on the link below.
In short, if you're willing to hold (or buy) NAB shares at today's price purely for the yield and its franking credits, this is understandable.
But if you're after some growth in both your yield and share price, I think there are better stock selections out there today.
