The National Australia Bank Ltd. (ASX: NAB) share price has risen over 10% from its lowest point in May, and is now trading at $26.30 at the time of writing—its highest level in seven months.
NAB shares ended April at $25.35 and today's prices represent an increase of just over 4%, month-to-month. Although the market has opened lower today, there is no doubt NAB shareholders have had a good May.
What's behind NAB's marvellous May?
NAB had a somewhat rocky start to May, with new Group Chief Executive Officer Philip Chronican announcing that NAB's famously generous dividend of 99 cents per share would be cut to 83 cents per share (a 16% decrease). This was actually taken very well by the market, with NAB shares up 3% over the week following the announcement. NAB's payout ratio was approaching 100% of earnings and so 99 cents per share was starting to look too good to be true. Even with the cut, NAB's dividend yield is still expected to be around 9% grossed-up going forward, which still smashes most (non-junk) ASX dividend payers and every term deposit out there.
NAB shares dipped to just under $24 in the middle of the month on the back of the shares going ex-dividend and US President Donald Trump re-igniting trade tensions with China (simultaneously). This was all forgotten when the Liberal/National parties unexpectedly won the Federal election on 18 May. The market (along with everyone else) had priced in a Labor victory and with it, the cost of the party's policies on cutting franking credits and curbing negative gearing—two policies that would have hit the 'Big Four' shares in particular.
The surprise victory wiped the slate clean and NAB shares rose over 9% in the aftermath. NAB's stablemates Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) also rose by similar amounts.
What is the outlook for NAB going forward?
Many investors are predicting a turning point in the property market after a bearish year or two. The Reserve Bank of Australia is expected to once again cut interest rates this year, possibly several times, which will give an immediate boost to the property market (and NAB's books).
Furthermore, the retaining of negative gearing may encourage higher-wealth investors to re-enter the market, which means rising demand for loans and mortgages from banks like NAB. I expect that the NAB share price will continue to strengthen from these factors, especially if the trade-war tensions cool.
While you're watching NAB's share price continue on its upward trajectory, take a closer look at these 2 ASX companies set to be the next big thing in the digital payment space…
