National Australia Bank Ltd. (ASX: NAB) and Macquarie Group Ltd (ASX: MQG) offer big dividends to shareholders and have quality franchises.
Should you buy NAB and Macquarie shares in 2017?
As can be seen in the chart above, both the NAB and Macquarie share prices have rallied strongly in the past six months.
Given their strong performances it is important to remind ourselves to not become overexposed to the sector. Indeed, if you already own shares of NAB or Macquarie, or maybe some other financial company, for risk purposes, you may want to reconsider buying more.
For example, if 25% or more of your portfolio is exposed to the financial industry it may be time to consider diversifying into other sectors.
Now that the warning is done, here are three reasons to consider owning NAB and Macquarie Group shares:
- Big dividends – In the year ahead, NAB and Macquarie shares are forecast to yield dividends equal to 6.2% fully franked and 4.7% partially franked, respectively.
- Relative safety – Australia's largest banks are highly regulated and dominant in their respective industries. Both of these factors lend themselves to better defensive qualities than ordinary ASX shares over the long term, in my opinion.
- Modest long-term growth – Both banks are well funded and boast leading market shares of key products. NAB is a leader in business banking while Macquarie is Australia's premier investment bank. I think that puts both banks in good stead for modest growth over time.
Foolish Takeaway
Macquarie and NAB are two leading Australian banks. NAB has refined its operations and can now focus on its core assets in Australia and New Zealand, while Macquarie continues to post impressive growth locally and abroad. However, it is also important to pay a good price.
Therefore, being patient and waiting for a lower entry level may be prudent. If either bank falls back from today's share price levels I will consider buying in.
