The Commonwealth Bank of Australia (ASX: CBA) share price has underperformed the ASX 200 by some distance in 2018.
Australia’s biggest bank has seen its share price fall approximately 14% since starting the year at $80.22.
Should you buy Commonwealth Bank shares in 2019?
While 2018 has been a big disappointment for shareholders of the big four banks due to the Royal Commission and the housing market downturn, I’m reasonably confident that things will be much better for them in 2019.
Of course, this is reliant on the Royal Commission final report not including any nasty surprises in it when it is released in February. I don’t expect it will do and feel the market has already priced in the worst case scenario in any case.
So with the shares of Commonwealth Bank, Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), and Westpac Banking Corp (ASX: WBC) all trading on meaningfully lower multiples than their averages over the last decade, I believe buyers could return in their droves in February and drive their shares higher again.
Especially given how attractive they are for income investors in this low interest rate environment.
Commonwealth Bank’s shares currently offer a trailing fully franked $4.31 per share dividend, which equates to a yield of almost 6.3% based on its last close price.
This is far higher than the market average and significantly better than anything you’ll get with savings accounts or term deposits.
In light of this, I think Commonwealth Bank would be a good investment option in 2019.
However, it is not my first pick in the industry. Due to the even greater yield on offer from Westpac’s shares, it is still my first choice bank to own next year. Not far behind Westpac would be ANZ Bank at this point for valuation reasons.
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.