Should you buy Westpac Banking Corp shares?

So far in 2018 the Westpac Banking Corp (ASX: WBC) share price has been one of the worst performers on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) with a decline of 8%.

Similar declines have been seen across the whole banking sector with the likes of National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) also tumbling lower as the Royal Commission continues to weigh on investor sentiment.

Is this a buying opportunity?

I think it could be. In my opinion Westpac’s shares are now priced as though something untoward will be uncovered during the Royal Commission. I think this de-risks an investment somewhat, providing investors with a more compelling risk/reward.

Especially when its shares are changing hands at just 12x trailing earnings and 1.6x book value, which is a meaningful discount to its average over the past few years.

A further bonus is the dividend that its shares provide. Based on its last close price, the banking giant’s shares provide a trailing fully franked 6.4% yield. This is significantly better than the market average and my next favourite banking share, Commonwealth Bank of Australia (ASX: CBA).

Commonwealth Bank of Australia’s shares offer investors a trailing fully franked 5.9% dividend at present.

I’m not alone in thinking Westpac is in the buy zone. Both Deutsche Bank and Macquarie have the equivalent of buy ratings on the bank’s shares with price targets of $34.50 and $35.00, respectively.

The mid-point of these price targets implies potential upside of almost 21% for the Westpac share price over the next 12 months. Add in the dividend and this stretches to approximately 27.5%.

I feel this potential return makes it worth putting aside the negative sentiment brought about by the Royal Commission and considering a patient investment in the banking giant’s shares today.

Not keen on the banks? OUR #1 dividend pick for April is revealed for FREE here!

Financial year 2018 is here and The Motley Fool’s dividend detective Andrew Page has revealed his must buy dividend share to grow your wealth in 2018.

You might not know this market leader's name, but it's rapidly expanding into a highly profitable niche market here in Australia. Even better, the shares boast a strong, fully franked dividend that should balloon in the years to come. In other words, we're looking at the holy grail of incredible long-term growth potential AND income you can watch accruing in your account in real time!

Simply click here to grab your FREE copy of this up-to-the-minute research report on our #1 dividend share recommendation now.

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of National Australia Bank 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 Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.