The National Australia Bank Ltd. (ASX: NAB) share price has fallen back from its recent high of $34 — but that's not the only reason to put NAB shares on your watchlist.
Are NAB shares cheap?
Firstly, I should note that I do not believe NAB shares are dirt cheap. Despite falling back from a recent high of $34 to $30 today, I think the company's shares are slightly above their fair value.
Meaning, I do not believe investors who buy today would be getting a bargain – or even a 'good' deal. If anything, you could be buying at more than market value if you invest today.
If that sounds strange – it shouldn't. There is a difference between price and value.
And you can bet that 'the market' is not going to gift us a bargain on blue chips like NAB — when the economy is going well. We'll have to wait for the bad times for that to happen.
Nonetheless, here are two reasons I think NAB shares should be on your watchlist.
1. Dividends
At the end of the day, investing is about putting cash in your pocket from selling your investment many years down the track or via dividends. NAB's dividend payments fell slightly during the global financial crisis (GFC) of 2008 but promptly recovered. It has proven to be a consistent dividend payer.
From the outside, I look at NAB's current 6.6% fully franked dividend with envy. However, I'll be ready and waiting for another market downturn to run the ruler over its shares once again.
2. A leaner bank
If you asked me five years ago if I would buy NAB shares I would have said "no" without blinking. For years, the bank underperformed its peers because it had a mountain of bad loans and the ruins of its former empire-building management team plagued its balance sheet.
However, nowadays, NAB is a far leaner and more efficient bank. I think it will improve its returns markedly over time.
Foolish Takeaway
In my book, NAB shares are not a buy today. However, I think the bank is worth keeping a close eye on now and into the future.
