With its 11% yield, is the Westpac share price a buy?

Is the Westpac Banking Corp (ASX:WBC) share price a buy?

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Is the Westpac Banking Corp (ASX: WBC) share price and yield a buy at the end of 2018?

It's been a tough year for Australia's oldest bank, the Westpac share price has fallen around 24% since the start of the year. The big dividend doesn't quite make up for that capital loss!

But, ultra-long-term holders of Westpac can be pleased with the steady supply of dividend income. It must be said that Westpac has grown the dividend nicely since the GFC and has consistently paid $0.94 every six months since 2015.

Westpac may not be generating much growth, but at least it is being a consistent dividend payer for shareholders via a high level of income.

The Royal Commission has given Westpac, Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and AMP Limited (ASX: AMP) shareholders a lot to think about.

Westpac is more exposed to the housing market with its loan book compared to NAB and ANZ. This has been a blessing over the past five years with the incredible house price run, but if things turn sour and bad debts rise it could be a painful experience.

The pain is being felt in Melbourne and Sydney, where 60% of the housing market value is located.

Some market detractors are saying that the big banks are causing this market downturn. I don't think that's quite true, Sydney prices were heading down even before the Royal Commission started. There are many other factors including rising interest rates, less foreign buyers and unaffordability.

To me, it seems as though banks are finally lending with the proper checks they should have been using this whole time. I'd want to know if a borrower isn't going to repay me in less-than-rosy economic conditions.

Is Westpac a buy?

If you're an Australian economy optimist then Westpac could be a buy today. It's trading at only 10x FY19's estimated earnings with a grossed-up dividend yield of 11.2%.

But, if you're concerned about the direction of Australia's housing market and the economy then there could be better investment opportunities for your money out there.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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