Should you be worried about your ANZ and Westpac Banking Corp shares?

Shares in Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) both traded higher this morning, despite a flat start from the S&P/ASX 200 Index (ASX: XJO) (INDEXASX: XJO).

Zooming out a little further, over the past five years, both companies are up well over 100% when dividends are included. On a large sum of money, those types of gains can be truly life changing.

Given their stellar performances however, some analysts and investors have begun to question whether, or not, now would be a good time to take some profits off the table.

For a while I’ve been saying neither ANZ nor Westpac are a ‘Buy’ at current prices, but could they now be a ‘Sell’ instead?

Westpac, our second-largest bank by market capitalisation, is up a healthy 5.44% this year alone despite many analysts and commentators (myself included) stating that it lacks any growth prospects. I stand by my opinion but I’m not alone.

Morningstar’s analysts’ consensus forecasts are predicting the bank to grow earnings per share around 10% between 2013 and 2016. I don’t believe its current high price is justified given its outlook for coming years, so unless you bought shares at a very reasonable price, I believe your money could be better spent elsewhere.

ANZ, on the other hand, has its International & Institutional Banking division which is busy growing its presence in Asia and abroad. By 2017 the bank hopes to draw 25% to 30% of revenues from Asia Pacific, Europe and Americas markets.

However, whilst I believe ANZ will be the fastest growing big bank, you’d have to be willing to pay over 15 times trailing earnings per share to buy the stock. I cannot justify paying such a high price and, as a result, I believe ANZ is a ‘Hold’.

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Westpac and ANZ have become safe havens for many local and foreign income investors who want to escape low interest rates. I believe this has been one of, if not the, biggest factor in driving up their share prices. However, as savvy investors know, no stock is a buy at any price.

That's why our top analyst has been busy scouring through the other 2000 stocks listed on the ASX, coming up with great dividend stocks to buy right now. And he's found a great one I'm considering buying today! It is a cheap and growing small-cap ASX stock with a 7% grossed-up dividend yield. Our top analyst recently dubbed it, "The Motley Fool's Top Dividend Stock For 2014 - 2015". Best of all: You can get the name and code of this ultra-promising stock for free! Just click here to download your free 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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