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Here’s what you can expect from Australia and New Zealand Banking Group in 2015

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.

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

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