I would be a happy shareholder at the current National Australia Bank Ltd. (ASX: NAB) share price and Wesfarmers Ltd (ASX: WES) share price.
However, as I have noted a few times recently, neither company strikes me as a bargain at today's prices, so I probably won't be buying in anytime soon.
Nonetheless, here are three reasons I think it is worth holding onto NAB shares and Wesfarmers shares in 2017.
1. Dividends
In 2017, analysts currently forecast NAB to pay a fully franked dividend of 5.7% and Wesfarmers to pay a fully franked dividend of 5%. Importantly, these dividends look to be sustainable, as least for the next 18 months. When we consider that term deposits at a bank are offering just 2.3% to 2.5% per year, those tax-effective dividends are even more appealing.
2. Brands
Having a strong brand is often greatly underestimated by sharemarket investors. Just take one look at Woolworths Limited (ASX: WOW), whose shares plummeted over the past three years only to stage a dramatic comeback in recent times. Having a reputable brand instils loyalty with customers and gives a company options when things go south.
Wesfarmers owns Coles, Bunnings Warehouse, Kmart, Target and more, so it has some great brands under its control. NAB has its own brand (obviously), but it also operates through subsidiaries like MLC, UBank and Bank of New Zealand.
3. Growth
Wesfarmers' Bunnings Warehouse and Kmart have been chalking up decent returns for investors and appear set to continue doing so. Coles is the number-one business for Wesfarmers — based on profit — but it is being challenged by strong competition from Woolies, Aldi and others. I suspect it will grow its profits over coming years, but it will be more modest growth than that which it has achieved in recent times.
NAB has recently divested many of its poorly performing businesses, such as its UK banking group CYBG PLC CDI (ASX: CYB). This should make the business more efficient, leading to greater returns over time.
