The Commonwealth Bank of Australia (ASX: CBA) has a history of outperforming. This year could be more of the same.
Commonwealth Bank Share Price
3 reasons to own Commonwealth Bank shares this year
Now, before you rush out and buy Commbank shares, you should know that "own" does not mean "buy now". If you don't already own shares, you may want to hold off until you read this full article.
What's more, given the super-impressive share price performance of Australia's largest bank these past few years (decades?), you may be overexposed to the banking sector. For example, if you hold more than 30% of your portfolio in bank stocks, I think that's too much.
Nonetheless, here are three reasons to own Commbank shares this year:
- Dividends – Even at today's share prices, Commbank shares are expected to pay a fully franked dividend of 5.2%.
- Moderate growth – Commbank is streets ahead of its competitors in terms of technology, with many of them now playing catchup. Together with a strong capital base, Commbank's push into tech bodes well for its future profit growth. I expect mid-single digit profit growth over the medium term is achievable.
- Relative safety – Commbank is Australia's biggest bank and company. That affords it a few points for safety. While nothing will stop its share price falling, the company itself is well regulated and integral to the Australian economy.
Foolish Takeaway
Commbank is a great company and if I held shares today I would keep holding on. You won't find many better dividend stocks in Australia, especially once you consider the tax liability incurred for selling at a gain.
However, I do not believe Commbank shares are a buy today. Indeed, it is a little too expensive to get a 'buy' rating from me. It would need to drop in price before I'd get excited.
