Foolish Question: Bendigo and Adelaide Bank


A Motley Fool reader asks…

A few  years ago, a  stock advice site gave a strong recommendation for Bendigo & Adelaide Bank (ASX: BEN).

At that stage the shares were around $11, with the site advising the shares would head towards $18 over the following 6 month period.

Now we know that this did not happen and thankfully I chose to see what would happen and did not buy the shares. However I did look at the stats for Bendigo and did not dislike it. I was also impressed by the dividend yield.

Reason I am asking, now at around $7.30 it is an even better buy that at $11. However if things go more pear shaped in Europe and we get a price of $5.00 would that not be a sensational buy?

Could you run a rule over Bendigo and maybe comment on my thinking? They do a lot for us here in the country. Would you call them a company worth investing in?

The Fool replies…

We weren’t fans of Bendigo at $11, and we’re not necessarily fans at the current price. The growth drivers – house prices, consumer credit and GDP growth – for banks are sluggish at the moment, and there are a lot of unknown debt risks on bank balance sheets.

We’d be interested at a lower price, but not at the moment, and would likely prefer the larger banks, such as ANZ (ASX: ANZ), Commonwealth Bank (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac (ASX: WBC) given the choice.

As to setting a price target for the future, that’s a tough ask. We don’t know what would happen to the quality of Bendigo’s business on the way to $5. If that happened with no additional risk of bad debts, it certainly would be attractive – but it’s hard to imagine one without the other.

We like the way you think, but we’d want to have a fresh look at the quality of the business before committing to buying at some point in the future.

If you’re in the market for some high yielding ASX shares, look no further than our “Secure Your Future with 3 Rock-Solid Dividend Stocks” report. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

 More reading

The Motley Fools purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available

Taboola Articles

OUR #1 DIVIDEND PICK FOR 2016...

Forget BHP and Woolworths. This "dirt cheap" company is growing like gangbusters, and trading on a 5.6% dividend yield, FULLY FRANKED (8% gross). With interest rates set to stay at these low levels for years to come, for hungry investors, including SMSFs, this ASX company could be the "holy grail" of dividend plays for 2016.

Enter your email below to discover the name, code and a full investment analysis in our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2016.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.