National Australia Bank Ltd. (ASX: NAB) and Wesfarmers Ltd (ASX: WES) are two of the most highly regarded dividend stocks in the ALL ORDINARIES (ASX: XAO) (Index: ^AXAO) index.
They each boast strong brand power, national reach and have consistently offered tax-effective franking credits to shareholders.
With NAB and Wesfarmers shares down 15% and 14%, respectively, over the past 12 months, it could be time to take a second look at both companies.
National Australia Bank
NAB shares have come under heavy selling pressure since the release of its 2015 full-year profit result last week. Despite achieving a promising headline figure of 15% profit growth and delivering on some operational targets, analysts and investors may be becoming increasingly concerned the dream run for Australia's major banks is nearing its end.
Indeed, increased regulatory uncertainty, slowing credit markets and intense competition (on a level playing field) does not bode well for outsized investment returns from NAB shares, in this Fools opinion.
Wesfarmers
Wesfarmers is the name behind Coles, Bunnings, Kmart, Officeworks, Target and more. Wesfarmers' shares have underperformed the All Ordinaries index over the past three years despite relatively strong performances by the Coles, Bunnings and Officeworks businesses.
Concerns over growing competition in the local grocery market have already wreaked havoc with shares of rivals such as Woolworths Limited (ASX: WOW) and Metcash Limited (ASX: WOW). Coupled with a slowdown in the broader economy, investors may be growing concerned the same selling pressure felt by Woolies and Metcash could see Wesfarmers' shares head lower in the near term.
Buy, Hold or Sell
At today's prices, I think National Australia Bank shares are compelling because they trade on a trailing 6.6% fully franked dividend. However, I suspect the banks may be forced to trim their dividend payouts in the coming three years, and when coupled with below-average profit growth, I find it difficult to envisage their shares outperforming other 'growth' alternatives.
Wesfarmers would be a better dividend stock idea than NAB, in my opinion. However, it'll need to come down from its current price of nearly $39 before I'd buy in.
