What's all the fuss about National Australia Bank Ltd. (ASX: NAB) shares?
According to the 16 analysts polled by The Wall Street Journal, only one analyst has a 'sell' rating on National Australia Bank shares – just 6% of all the 'experts'.
Having conviction in your ideas is not a bad thing. But group think is a very quick way to the poor house in my opinion. Indeed, I find it is the people who do not agree with you that you should listen to.
Below, I have included a quick list of some pros and cons, for and against buying NAB shares today.
The Bull Case
There are a number of reasons to be positive on NAB, for example:
- The bank is (nearly) free of its UK legacy issues, following the divestment of Clydesdale and Yorkshire Bank, CYBG PLC (ASX: CYB)
- The 80% sale of NAB Wealth's life business streamlines its local operations
- Shares trade on a massive trailing dividend yield of more than 9.5% grossed up for franking credits (6.7% fully franked)
The Bear Case
Although there are good reasons to be positive about owning NAB shares, there are some blemishes on the investment case:
- Property markets in major cities appear expensive, so asset (i.e. loan) growth is unlikely to continue at the same pace
- Regulation is increasing, which could see profit margins fall further
- Impairments have risen but could go higher from here
Foolish takeaway
Whenever you consider making any investment, do your best to find someone that disagrees with you. And if you cannot find an answer to their concerns it may be time to look elsewhere.
NAB's dividend yield is very tempting in the low interest rate environment and given the recent performance of its shares I am not surprised so many analysts believe it is a good time to buy.
However, personally, I will not buy NAB shares anytime soon because I think there are better opportunities elsewhere. Fortunately, there is no shortage of good dividend stocks on the ASX.
