The National Australia Bank Ltd. (ASX: NAB) share price is down 11% in three months.
NAB share price
As can be seen above, the NAB share price (red) has been sold off relative to the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
However, despite its recent falls, I think NAB shares are still too expensive to justify an investment. Nonetheless, I have its shares on my watchlist for the following reasons:
- Dividends. NAB has an enormous forecast dividend of 6.7% fully franked. That's over 9.6% grossed up. Pleasingly, if I get my way – its share price goes lower and I can buy in – its dividend yield may even get larger. While there is a risk that its dividend is cut, NAB has proven over time to be a consistent and reliable source of dividend income.
- Less housing exposure. Amongst the major banks, including Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), NAB has the least share of mortgages. From some first-hand accounts, I'm also led to believe that it has good lending standards.
Historically, NAB has been the business bank. In my opinion, if house prices continue to slow over coming years, this will gave NAB an edge over its peers.
Foolish Takeaway
NAB shares are not a buy in my book. However, if its share price continues on its recent trajectory it will move higher and higher up my watchlist. However, I'm a little sceptical of all bank shares at today's prices given the outlook for the Aussie economy, particularly housing.
Therefore, I think it may pay to be a little more patient when buying any Australian bank share.
