With the grossed-up dividend yield of 10%, is the Westpac Banking Corp (ASX: WBC) share price a buy?
Things have changed quite drastically for the big ASX bank since the start of the month.
The Liberals are in power, not Labor.
Franking credit refunds have been retained for investors.
The Australian Prudential Regulation Authority (APRA) has suggested changing the interest rate lending buffer to 2.5% above the current lending rate, rather than a fixed 7%.
Finally, the Reserve Bank of Australia (RBA) has cut interest rates by 0.25% and has signalled that a 1% interest rate may not be far away.
The last point is a bit contentious because Westpac did not give borrowers the full rate cut, unlike Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB). However, it's certainly good for Westpac's net interest margin (NIM) and net profit.
Westpac will be hoping, along with the Government, that all of these positive steps will rectify the Australian economy's footing and the wobbly property market.
Whilst there was a slowdown of the decline of Australian property prices in May 2019, Sydney dwelling prices still fell by 0.5% and Melbourne dwelling prices dropped by 0.3%. National dwelling prices dropped by 0.4% over the month.
If house prices do indeed stop falling then hopefully that means that Westpac's bad debt expense won't grow, as it did in the last report.
Foolish takeaway
Westpac is currently trading at 12x FY20's estimated earnings with a grossed-up dividend yield of 9.7%. If Westpac's earnings are stable until Australia economic growth comes back then Westpac could be a decent option, but I think there are better investment options out there.
