Is the National Australia Bank Ltd share price a buy?

Credit: NAB

The National Australia Bank Ltd (ASX: NAB) share price is lower than it was a year ago, does that make it a buy today?

NAB is one of Australia’s big four banks and is also one of Australia’s largest businesses. It used to have banking operations in the USA and the UK but has since divested them.

It now focuses on the domestic mortgage market and also has a reputation for working with businesses.

There isn’t a huge noticeable difference between the big four banks, but there is enough of a difference to prefer one over another.

The main reason why I’d choose NAB over the other three is its forward-thinking relationships with some of the fastest-growing businesses in Australia.

For example, it currently has a banking relationship with REA Group Limited (ASX: REA) for its mortgage division. It was the first major Australian bank to work with Xero Limited (ASX: XRO) and it will be the first to allow payments inside the Xero ecosystem.

NAB is also the bank standing behind Afterpay Touch Group Ltd (ASX: APT), which is generating large growth in Australia and is soon expanding overseas.

Of course, the main reason to consider a bank stock is its dividend. It currently has a grossed-up dividend yield of 9.39%, which is a lot better than the interest rate offered on its savings account.

Foolish takeaway

Ultimately, a lot of NAB’s success is dependent on the Australian economy and housing market. It depends what happens over the next few years to determine whether the big four banks will continue to prosper or there will be a big dip (or worse).

At the current levels I wouldn’t bet that NAB will deliver market-beating returns, but it could be a decent option for investors who are only concerned with income.

Instead, I'd rather invest in a dividend stock that will deliver strong growth and a good yield, which fits the description of this exciting stock.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, National Australia Bank Limited, and Xero. The Motley Fool Australia has recommended REA Group Limited. 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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