Whilst shares in Australia and New Zealand Banking Group (ASX: ANZ) appear quite pricey, there are a number of reasons why current shareholders should continue holding the stock.
Unlike its competitors such as Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB), ANZ continues to remain a promising growth prospect in the ultra-long term due to its Asian strategy and relatively small share of the domestic mortgage market.
Recently, its long-term potential has begun to show through in its share price movements.
Looking back over the past 10 years, ANZ shares have clearly underperformed both Commonwealth Bank of Australia (ASX: CBA) and Westpac. However, narrowing our view to just the past five years, ANZ shares are up 108% versus the 116% and 77% gain from its two bigger peers, respectively. The S&P/ASX 200 Index (ASX: XJO) (INDEX: ^AXJO) is up 44%.
In coming years, I believe ANZ will likely replace Commonwealth Bank as the best performing company of the group.
Although I don't think ANZ is a bargain at current prices, here's why I think current shareholders should continue holding the stock, despite its massive gains in recent years.
1. The bank's Super Regional Strategy is now taking off. Trade flows, foreign exchange and international banking are growing in demand as Asia's middle-class population increases. As a result more customers are entering ANZ branches throughout the region. Asia Pacific, Europe and America markets accounted for over 19% of FX-adjusted cash profits in the first half of FY14.
2. Recent share price performance provides an adequate buffer. If you bought ANZ shares two or more years ago, chances are you're now sitting on healthy gains. Instead of selling, you can use it as a "safety buffer" against any market volatility and enjoy the possibility of further share price appreciation in coming years.
3. A generous dividend. According to Morningstar's analysts' consensus, ANZ's dividend is expected to reach $1.90 per share in FY16.
