MENU

Why Bendigo and Adelaide Bank Ltd shares are on the rise today

One of the best performers on the market today has been the Bendigo and Adelaide Bank Ltd (ASX: BEN) share price.

In afternoon trade the regional bank’s shares are up almost 5% to $10.39.

Why are Bendigo and Adelaide Bank’s shares storming higher?

With no news out of the bank, today’s gain is likely to be attributable to a note out of Goldman Sachs this morning.

That note revealed that its analysts have upgraded its shares from a neutral rating to a buy with an improved price target of $11.60.

Even after today’s solid gain, this price target implies potential upside of over 11.5% for its shares over the next 12 months.

And with Goldman estimating a full-year fully franked dividend of 70 cents per share in FY 2018 and FY 2019 for Bendigo and Adelaide Bank, this 6.7% dividend yield increases the total potential return to over 18%.

Why is Goldman bullish on the bank?

According to the note, Goldman Sachs made the move as it believes Bendigo and Adelaide Bank has strong leverage to recent and future deposit margin improvement and has the most immediate leverage in the sector to a rising cash rate environment.

As you might expect, there are risks involved with an investment. Goldman has pointed to an increase in deposit competition and a cash rate trajectory which differs to its in-house view as being the key risks to the investment turning sour.

But after taking this into account, the broker remains confident that the company is the superior option in the regional bank space and prefers it to Bank of Queensland Limited (ASX: BOQ). Goldman has a neutral rating and $11.52 price target on the shares of its rival.

Elsewhere in the sector the broker has Westpac Banking Corp (ASX: WBC) shares on its buy list and Australia and New Zealand Banking Group (ASX: ANZ) shares on its coveted conviction buy list.

My pick of the group remains Westpac, but arguably all the banks look cheap after recent declines.

Like dividends but not keen on the banks? Then check out this dividend star.

OUR #1 dividend pick to grow your wealth over the new financial year 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 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 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.