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Is this your opportunity to buy National Australia Bank Ltd. shares on the cheap?

Unless you’re a shareholder in National Australia Bank Ltd (ASX: NAB), you probably wouldn’t have noticed it, but shares in the banking giant are already down 10% this year alone, compared to its three major peers. Income-hungry investors will be looking at its shares with a gleam in their eyes.

So with NAB shares losing nearly 5% since the beginning of 2014 and Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA) shares being up over 6% and 5% respectively – should you be buying?

A history of underperformance

The idea of underperformance is nothing new to NAB shareholders since, over the last 10 years, its share price has appreciated just 11% versus a return of 54% from the S&P/ASX 200 (ASX: XJO) (INDEX:^AXJO). Australia and New Zealand Banking Group (ASX: ANZ) has posted a gain of 83%.

In my opinion, there’s a big chance investors who expect the share price to turnaround and buy in at current prices, could be bitterly disappointed. Whilst there is the possibility it could be the dark horse of the ASX’s banks, there’s a number of reasons why it will struggle to impress the market anytime soon.

One big reason NAB shares have underperformed the market is due to its UK banking exposure. For years the UK Banking division and UK Commercial loan portfolio have weighed on earnings and, perhaps more importantly, distracted management. Whilst both businesses are now strengthening along with the UK economy, I’d prefer it pay down the few billion pounds in bad loans it currently holds and divest away from the UK business altogether. Another area of concern is NAB’s profitably in Australia where it has the lowest net interest margin.

A better dividend stock than NAB

If your primary reason for investing in the stock market is dividend income NAB’s 5.9% fully franked dividend yield has its appeal. However, there’s many other dividends stocks on the ASX which have an equally good dividend yield, but better growth prospects.

For example, our top analysts recently identified one ASX stock with a HUGE dividend yield and exceptional growth prospects. You can get the name and code of this ultra-promising dividend stock in our FREE report. Just click here to download your copy of "The Motley Fool's Top Dividend Stock for 2014-2015" today.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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