Is National Australia Bank Ltd. a buy at this share price?

Credit: NAB

Despite a slow start to 2016, the National Australia Bank Ltd. (ASX: NAB) share price has recently staged somewhat of a comeback.

Source: Google Finance

Source: Google Finance

Is National Australia Bank Ltd. a buy at this share price?

NAB shares have long been known as one of the S&P/ASX 200’s (Index: ^AXJO) (ASX: XJO) highest-yielding dividend stocks. And it is easy to see why. At today’s share price, the bank is expected to pay a fully franked dividend equivalent to a yield of 6.5%.

Aside from its meaty dividend yield, there are other reasons why it may be worth considering an investment in NAB shares, including:

  • No Clydesdale and Yorkshire Banking Group (ASX: CYB). With CYBG Plc (NAB’s former UK banking arm) off the books the bank can focus on its core assets in Australia and New Zealand.
  • NAB is a leading business bank. In addition to a healthy chunk of the Australian mortgage market, NAB is a major player in Australia’s business banking sector. Although some commentators are talking about an Australian recession (which may well eventuate), the credit cycle works in investors’ favour over the long run.
  • Interest rates could take pressure off margins. In my opinion, official interest rates will not be this low (1.5%) forever. Indeed, when the Reserve Bank of Australia eventually raises interest rates it will likely take some profit margin pressure off NAB and its peers.

Foolish takeaway

NAB is one of Australia’s premier banks. And having undertaken some major structural changes in the past two years it appears to have opted for a short-term pain and long-term gain approach, which is a positive way to manage a business over time.

However, despite offering a large dividend, I think investors may get a better opportunity to buy NAB shares sometime in the future.

Therefore, while we wait for a lower valuation I recommend running the ruler over other high-yielding dividend stocks trading at compelling prices. For example, we've just released our #1 dividend pick for 2017.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest.

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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