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Why this top broker thinks the ANZ share price is a buy

The Australia and New Zealand Banking Group (ASX: ANZ) share price has been an impressive performer over the last 10 weeks.

During this time the banking giant’s shares have outperformed the market with a gain of just under 19%.

The good news for investors is that one leading broker doesn’t think that ANZ’s shares have peaked yet and has tipped them to climb even higher this year.

According to a note out of Goldman Sachs, its analysts have a conviction buy rating and $29.35 price target on the bank’s shares.

In addition to this, the broker expects ANZ to continue to pay a fully franked $1.60 per share dividend this year.

Which means that ANZ’s shares could still provide a total return of 11.5% from the current share price if Goldman’s predictions prove accurate.

Why is Goldman Sachs bullish on ANZ?

Goldman has a preference for both ANZ and National Australia Bank Ltd (ASX: NAB) right now and remains neutral on the rest of the big banks, except for Bank of Queensland Limited (ASX: BOQ) which it rates as a sell.

In today’s note the broker wrote about the potential impact that cash rate cuts could have on the sector.

Goldman said: “While sector dividend yields and valuations relative to the industrials appear attractive, if the market continues to price a high likelihood of cash rate cuts, we think it is unlikely the sector will materially re-rate. We see the environment as supporting the commercially-focused major banks (ANZ and NAB), over the regional banks (Sell on BOQ).”

Should you invest?

I agree with Goldman on ANZ and believe it is well-positioned to deliver growth this year thanks to its cost cutting opportunities, low bad debts, and overweight exposure to commercial lending. For this reason, it is also my first choice in the sector right now.

But if you're not keen on the banks then check out these buy-rated dividend shares.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.

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