Did you know Australia's big four banks make up over 30% of the entire S&P/ASX 200 (Index: ^AXJO) (ASX: XJO)?
Throw in some regional banks and insurers, and our market has more than its fair share of financial stocks. Picking the right ones for your portfolio can be tough.
Two favourite financial stocks which many investors choose to hold are Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).
ANZ has a stronger track record for growth than NAB, increasing earnings per share from 169 cents to over 267 cents in the past decade.
On the other hand NAB's earnings per share have actually fallen from 242 cents to 218 cents –caused mostly by its troubling overseas exposure following the fallout from the Global Financial Crisis.
So it's little wonder why ANZ shares have easily outperformed NAB shares, rising 68% versus 31%, respectively, over the past 10 years.
Looking ahead however, there is some hope for the error-prone NAB. With an exit from the US market underway and a possible divestment of its UK banks on the cards, NAB could finally get its profitability back on track.
However, investors would be wise not to hold their breath because many NAB management teams have come and gone trying to do the same thing.
Unfortunately, despite boasting a forecast fully franked dividend yield of 5.4%, NAB shares do not appear cheap, especially when earnings are adjusted for cyclical elements like falling bad debts.
ANZ, which is tipped to be the fastest growing bank over the coming decade thanks to its exposure to Asia, is also sporting an expensive price tag. Whilst it's arguably the cheapest on forward-looking measures, the market appears to be pricing in strong growth, so it's probably best left on your watchlist, for now.
Foolish takeaway
If you're investing for the long term, ANZ appears to be the standout winner thanks to its solid track record and earnings growth from Asia. However Foolish (capital 'F') investors should look elsewhere for their dividend stock ideas because both NAB and ANZ appear expensive at today's prices.