Today is dividend payday for Bendigo and Adelaide Bank Ltd (ASX: BEN) shareholders – is the share a buy or a bust?
How the Bendigo share price has fared so far this year
The Bendigo share price is down 7.5% this year largely due to its rough treatment from investors after its half-year earnings release in February.
Some of the key takeaways from Bendigo's half-year result include:
- Cash earnings per share down 0.4% on pcp to 45.1 cents.
- Statutory net profit after tax (NPAT) up 0.2% on prior corresponding period (pcp) to $203.2 million.
- Retail deposits up 3.2% on pcp to $52.3 billion.
- Return on equity (ROE) fell 19 basis points (bps) to 7.94% for the half.
- Common Equity Tier 1 (CET1) capital ratio 14 bps higher at 8.76%.
- Interim dividend flat at 35 cents per share (cps), franked to 100%.
While some might think these results are fairly solid and the bank's share price could be good value at $9.68 per share, I think the Bendigo headwinds are a little too strong for my liking.
Between the ongoing Royal Commission fallout, the company's competitive disadvantage against the Big Four and its inability to gain advanced accreditation from APRA to grow its loan book, I'm not too bullish on Bendigo.
While the company offers a juicy 7.2% yield for investors, that's still under that of National Australia Bank Ltd's (ASX: NAB) 7.9% yield and on par with the likes of Westpac Banking Corporation Ltd (ASX: WBC).
The relative value argument could be made against Commonwealth Bank of Australia Ltd (ASX: CBA) and Australia and New Zealand Banking Group Ltd (ASX: ANZ), but they both yield 6% and have much better diversified lending growth prospects than the likes of Bendigo.
For those who are similarly bearish, I'd suggest investing those Bendigo dividends in this top-rated cannabis stock which could unlock some serious capital gains in 2019.
