Despite being a regular feature in many brokers’ favourite stock picks, shares of Australia and New Zealand Banking Group (ASX: ANZ) have not really done that much throughout 2014.
Since January 2 the bank’s share price is actually down 0.61%, along with the S&P/ASX 200 (INDEX: ^AXJO) (ASX: XJO) which is 0.41% lower. However with dividends included, ANZ’s yearly return is an ok 5%.
The catalyst for its poor share price performance can be put down to its high valuation throughout much of 2013/2014, and serves as a reminder to long-term investors that no stock is a buy at any price.
Indeed at today’s share price of approximately $32, ANZ has a price to tangible book ratio of 2.26 and trailing P/E ratio of 12. Whilst the latter compares favourably with the ASX’s average P/E ratio of 15.29, it’s vital to remember banks should always be valued on their loan book because that’s how they’ll be priced in a market crash.
Looking ahead to 2015 however, ANZ is expected to pay a full year dividend of $1.88 (2014: $1.78) per share, meaning it currently trades on a forecast dividend yield of 5.9%, or 8.3% grossed up.
Whilst it’s desirable to hold a stock paying such a high dividend yield before tax, the reality is if the shares are expensive the benefit of that yield could be quickly wiped out in a market downturn. An expensive share price is usually more sensitive to the share market’s wild gyrations.
Should you buy, hold, or sell ANZ in 2015?
I expect ANZ to be the fastest-growing big bank over the next decade but its share price currently reflects that potential, so it’s not a standout buy unless you’re holding for the ultra-long term. However if I bought shares at a lower level than today’s market price, I would be more than happy to hold throughout 2015 and wait for those juicy fully franked dividends to roll in.
These 3 stocks could be the next big movers in 2020
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
*Returns as of 6/8/2020
Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.
- ALL ORDINARIES finishes higher Monday: 10 shares you missed – October 30, 2017 4:44pm
- Are these the secrets behind Australia’s best ASX investors? – October 30, 2017 3:43pm
- My Aussie Share Market Investing Do’s of 2017/2018 – October 30, 2017 1:13pm