MENU

3 reasons to watch the Commonwealth Bank of Australia share price in 2017

There’s more talk of a housing bubble, but the Commonwealth Bank of Australia (ASX: CBA) share price has headed higher.

What housing bubble?

We could be in the middle of a housing bubble. If it popped, it would be a terrible thing for the entire economy and Commonwealth Bank. Fortunately, I don’t think we are in one.

Interest rates have dropped, sure. Household debt is up, too. But population density is increasing around major cities (forcing up property prices) and our population is only growing.

If interest rates rise suddenly that would be a disaster. But that’s unlikely.

And all markets — property and share markets included — will crash from time to time. If you are a diligent long-term investor, however, you would have already accepted this fact.

3 reasons to watch CBA shares in 2017

  1. Dividends. Commonwealth of Australia is expected to pay a dividend equivalent to a yield of 5.1% fully franked.
  2. Growth. According to analysts, CBA is expected to report steady profit growth in the year ahead. While analyst forecasts are often wrong, modest growth should keep the market happy.
  3. Relative safety. As Australia’s largest company and biggest bank, there are worse places to park your investment dollars. While no investment is guaranteed, CBA is an obvious low-risk choice for most income-focused portfolios.

Should you buy CBA shares?

I have said it a few times recently but Commonwealth Bank shares appear priced to perfection, meaning they are not a standout buy or sell in my book. The same can be said of rivals like Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ).

For shareholders, Commonwealth Bank has proven to be the best retail bank, but it attracts a premium valuation as a result of its historical performance.

The banks I’d run a ruler over first would be National Australia Bank Ltd. (ASX: NAB) and Macquarie Group Ltd (ASX: MQG). I think they both deserve further research at today’s prices. 

We've just released our #1 dividend pick for 2017. And the winner is...

With its shares up 155% in just the last five years, this 'under the radar' consumer favourite is both a hot growth stock AND our expert's #1 dividend pick for 2017. Now we're pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is click the link below!

Simply click here to receive your copy of our brand-new FREE report, "The Motley Fool's Top Dividend Stock for 2017."

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

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 Financial Services Guide (FSG) for more information.