3 reasons to hold National Australia Bank Ltd. shares

National Australia Bank Ltd. (ASX:NAB) is a leading bank, offering a generous dividend yield.

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National Australia Bank NAB

Despite each big bank stock being sold down in 2015, National Australia Bank Ltd. (ASX: NAB) has fared the best – falling ‘just’ 7.4%.

That compares to the more vicious selloffs of shares in Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group (ASX: ANZ) which are down 12% and 14%, respectively.

However, while the serial underperformer NAB has – perhaps surprisingly – performed better than its peer group so far in 2015, personally I believe its shares are not in the buy zone. I’ve previously said a good price to pay would be around $20 per share.

In saying that, I wouldn’t be in a rush to sell my shares (if I held some) either, because there are a number of reasons to be confident in the bank’s future, including:

  1. Dividends. NAB said that despite its record-breaking $5 billion capital raising earlier this year, it intends to pay a final dividend of 99 cents. Combined with its interim dividend of 99 cents, at today’s prices, NAB shares trade on a dividend yield of 6.3% fully franked.
  2. A resilient local business. Over the past two decades, NAB shares have been weighed down by some underperforming assets and poor managerial decisions. Nonetheless, the company has achieved solid growth over the past two decades, but arguably has many strings it can pull to improve its profitability in the future.
  3. Divestments. Under CEO Andrew Thorburn, NAB has taken bold steps to divest its US bank, Great Western Bancorp; and plans to float its troublesome UK bank, Clydesdale, to public markets later this year. If successful, NAB will be able to get back to focusing on its most profitable businesses in Australia and New Zealand.

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Motley Fool contributor Owen Raskiewicz has no position in any stocks mentioned. Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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