3 reasons to hold National Australia Bank Ltd. shares

National Australia Bank Ltd. (ASX:NAB) is a leading bank, offering a generous dividend yield.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Despite each big bank stock being sold down in 2015, National Australia Bank Ltd. (ASX: NAB) has fared the best – falling 'just' 7.4%.

That compares to the more vicious selloffs of shares in Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group (ASX: ANZ) which are down 12% and 14%, respectively.

However, while the serial underperformer NAB has – perhaps surprisingly – performed better than its peer group so far in 2015, personally I believe its shares are not in the buy zone. I've previously said a good price to pay would be around $20 per share.

In saying that, I wouldn't be in a rush to sell my shares (if I held some) either, because there are a number of reasons to be confident in the bank's future, including:

  1. Dividends. NAB said that despite its record-breaking $5 billion capital raising earlier this year, it intends to pay a final dividend of 99 cents. Combined with its interim dividend of 99 cents, at today's prices, NAB shares trade on a dividend yield of 6.3% fully franked.
  2. A resilient local business. Over the past two decades, NAB shares have been weighed down by some underperforming assets and poor managerial decisions. Nonetheless, the company has achieved solid growth over the past two decades, but arguably has many strings it can pull to improve its profitability in the future.
  3. Divestments. Under CEO Andrew Thorburn, NAB has taken bold steps to divest its US bank, Great Western Bancorp; and plans to float its troublesome UK bank, Clydesdale, to public markets later this year. If successful, NAB will be able to get back to focusing on its most profitable businesses in Australia and New Zealand.
Motley Fool contributor Owen Raskiewicz has no position in any stocks mentioned. Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »