Although the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) Index has retreated marginally today, shares in Commonwealth Bank of Australia (ASX: CBA) have managed to rise 39c or 0.5% to be trading at $82.39. Earlier in the session, they reached a high of $82.45, which compares to their all-time high of $82.69.
They have been the strongest performers from the banking sector today with National Australia Bank Ltd (ASX: NAB) trailing just behind with a 0.4% gain.
Here are three reasons investors might be buying the bank's stock today…
1) Competition. In a sign of fierce competition, Commonwealth Bank recently slashed its five-year fixed mortgage rate to a record low of 4.99%. While it will recognise less interest revenue as a result, it should also help to win more customers.
2) Yield. Although its dividend yield has dropped as the stock price has ascended, it is still much more appealing than alternative returns from term deposits or bonds. Based on Morningstar's estimates, it is expected to distribute 418.9 cents per share in 2015, putting it on a fully franked yield of 5.1%.
3) Interest Rates. To expand on the above point, interest rates are currently stuck on 2.5% and some analysts are forecasting them to drop even lower. This would likely drive the bank's earnings even higher in the near-term.
This ASX stock is a better bet than the banks
Unfortunately, I don't share the bullish stance on the banks that many other investors possess. While there is no questioning their high-quality nature, I just don't think they present as bargain buys right now.
