The Wesfarmers Ltd (ASX: WES) share price and National Australia Bank Ltd. (ASX: NAB) share price has rallied in 2017, outperforming the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
NAB and Wesfarmers Share Prices
As can be seen in the chart above, these two household blue chip shares continue to be a favourite amongst investors.
However, I believe that both of these companies has done little to justify the recent share price rally. In my opinion, both companies' shares appear a little too expensive to justify a buy rating at today's prices.
What about their fully franked dividends?
NAB has an enviable forecast dividend of $1.94 per share, fully franked. As a yield, it represents a cash return of 5.7% or 8.1% after tax. Despite the forecast dividends being below this year's payments, that's impressive.
As the owner of Coles, Kmart, Target, Bunnings Warehouse and more, there is also a lot to like about Wesfarmers shares. The $52 billion company has highly attractive defensive qualities, especially in an environment with record-low interest rates. It is forecast to pay a fully franked dividend of around 4.9%.
Buy, Hold or Sell
At today's prices, it is very difficult to get a 5% plus return on your investment. However, investors should always be aware of the risks. Indeed, shares are far riskier than term deposits and savings accounts.
Buying shares in companies that are trading below their 'intrinsic value' is the only way to sustainably grow wealth over the long-term, in my opinion. Unfortunately, I do not believe NAB or Wesfarmers shares offer standout value for investors. I would rate them as a 'hold', despite their lofty dividend yields.
