The National Australia Bank Ltd (ASX: NAB) share price is up 23% over the past year.
NAB is one of the biggest companies in Australia having grown with Australia's economy over the last two decades.
There is a lot to like about NAB's business. It has huge recurring revenue and cashflow thanks to its large loan book which is generating interest. It has a huge grossed-up dividend yield of 9.32%, which is great for retirees. It has strengthened its business by divesting its large overseas businesses including CYBG PLC CDI 1:1 (ASX: CYB).
I like NAB more than Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ).
The main reason I like it more is because it seems to be more forward-thinking than the other banks. NAB was quick to set up an arrangement with Xero FPO NZX (ASX: XRO). It has also recently created an agreement with REA Group Limited (ASX: REA).
Although each agreement is a small part of earnings, it speaks volumes about NAB management thinking outside the box and working with the latest upcoming businesses.
NAB is at risk of the Australian economy slowing down as much as any other bank. Household debt continues to grow to dangerous levels which isn't good for the stability of the country.
The big four banks are all reporting cyclical low bad debts, which is pleasing for the current reporting periods but could signal that bad debts will soon be rising.
The big four banks are some of the most widely held shares in institution and personal portfolios alike. They have been good investments but I would be wary about having a large part of my portfolio exposed to the banks. I'd rather buy the banks during a recession when their share prices are hit harder than most.
Time to buy?
NAB is currently trading at 13x FY17's estimated earnings with a grossed-up dividend yield of 9.32%. I wouldn't be a buyer at today's share price, but I can understand why some investors would.
