Is it safe to buy Westpac Banking Corp (ASX:WBC) shares?

On Tuesday the Westpac Banking Corp (ASX: WBC) share price tumbled almost 1% lower to $28.43.

This means that Australia’s oldest bank has now seen its share price fall over 15% since peaking at $33.68 in October.

Should you pick up shares today?

I think that buying Westpac under $30.00 is great value. Not only does this mean its shares are trading well below historic earnings and book value multiples, they offer one of the more generous dividend yields on the market.

Based on the last close price, Westpac’s shares now provide investors with a trailing fully franked 6.6% dividend.

This is significantly higher than the market average of 4% and even many of its banking peers. At present rivals Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group (ASX: ANZ) offer trailing fully franked 6.1% and 5.7% dividends, respectively.

What are the risks?

But an investment in Westpac is certainly not without risk.

The Royal Commission is likely to weigh heavily on the banks for some time to come. As could any penalties that are imposed by regulators as a result of the Commission. This could make their shares more volatile than normal.

In addition to this, the Australian housing market appears to be cooling and could lead to lower demand for home and investment property loans.

What now?

The good news is that I think that the shares of Westpac and the rest of the big four have priced all the doom and gloom in now.

As such, I think the risk/reward on offer from the banks is compelling enough to justify an investment. Though, I would only recommend doing so if you didn’t have meaningful exposure to the banks already.

Investors that already have meaningful exposure to the banks might want to consider checking out some of the top dividend shares available in the retail sector instead.

This dividend share, for example, could be a great alternative to the banks.

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.