Shares in National Australia Bank Ltd. (ASX: NAB) have been the worst performing of any of the major banks over the past 10 years. In fact an investment in NAB, a decade ago, has only outperformed the S&P/ASX200 Index (INDEXASX: XJO) when dividends are included.
Although I'm not buying in, here are three reasons why NAB could be a worthwhile investment over the ultra-long term.
1. A juicy 5.8% fully franked dividend. In the current low interest rate environment, dividends are king and NAB's offering the biggest forecast yield of the major banks.
2. Cheaper share price. Whilst not historically cheap, compared to its peers, NAB trades on more competitive valuation multiples.
3. It could be at a turning point. Despite underperforming its rivals, a stronger UK economy and further divestments of its bad commercial property portfolio could give investors renewed faith in the bank. Although a long shot, if NAB can rid itself of its poorly performing debts, the long-term outlook for the bank becomes a whole lot brighter.
To buy, or not?
For investors seeking income from their stocks, there are reasons why NAB could deserve to occupy a position in your portfolio. However, the risk of a falling share price is very real and betting on a speedy turnaround from NAB's troubled divisions is not something I'm prepared to do at this point. Instead I've got my eye on other big dividend stocks with better long-term growth potential.
