Due to its premium valuation, there are not many brokers that are overly positive on Commonwealth Bank of Australia (ASX: CBA) shares.
But that doesn't mean that nobody is!
In fact, one leading broker has Australia's largest bank on its best ideas list again this month.
That broker is Morgans, which named CBA and rival Westpac Banking Corp (ASX: WBC) as two of its best ideas in June.
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What is a best idea?
Morgans explains that its best ideas are those that it thinks offer the highest risk-adjusted returns over a 12-month timeframe.
They are also supported by a higher-than-average level of confidence and are its most preferred sector exposures.
Interestingly, CBA shares make the list despite the broker only having a hold rating and a $96.08 price target on them. This is lower than the current CBA share price of $100.51.
Though, it is worth noting that Morgans is forecasting fully franked dividends per share of $4.26 in FY 2023 and $4.20 in FY 2024. This provides income investors with attractive yields of approximately 4.2% in both years.
What is the broker saying about CBA shares?
Morgans see CBA as the highest quality bank on the Australian share market and a core portfolio holding for the long term. It explains:
The second largest stock on the ASX by market capitalisation. We view CBA as the highest quality bank and a core portfolio holding for the long term, but the trade-off is it is the most expensive on key valuation metrics (including the lowest dividend yield). Amongst the major banks, CBA has the highest return on equity, lowest cost of equity (reflecting asset and funding mix), and strongest technology. It is currently benefitting from the sugar hit of both the rising rate environment and relatively benign credit environment.
