The Motley Fool

Is the NAB share price a buy?

Is the National Australia Bank Ltd (ASX: NAB) share price a buy?

The big four ASX bank’s share price has risen by 15% since the start of the year, when you add in the half-year dividend it has provided a return of around 20% including the franking credits.

NAB recently reported 7.1% cash profit growth in its half year result, so the share price growth could certainly be somewhat justified. Share prices generally follow earnings up or down. 

The bank may also be a beneficiary from the RBA cutting interest rates and the regulator APRA deciding to reduce the interest buffer from a fixed 7% to a 2.5% buffer above the current interest rate borrowers pay. These are two positive changes in recent times. 

NAB is passing on the full RBA cut to its borrowers, so it won’t change the net interest margin (NIM), but it could benefit from its under-pressure borrowers being able to afford their loans more easily. Although it’s questionable whether $50 or $100 a month would actually help that much. Some of NAB’s borrowers are more than 90 days in arrears, so it would take a significant change to improve their situation.

The big banks of NAB, Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) have all had a number of wins since the Royal Commission’s final report release.

NAB definitely needs more security that its borrowers won’t become bad debts, but the APRA change could boost credit for the bank. With house prices drifting lower, credit growth has been sluggish. The main ways that NAB can grow profit is boosting its NIM and achieving credit growth, so any growth is useful.

Foolish takeaway

NAB could be the big bank to watch with new management, it’s trading at 12x FY20’s estimated earnings with a grossed-up dividend yield of 8.7% which seems more sustainable after the dividend reduction. Unless Australia goes through a recession, NAB could continue to be a solid dividend payer. 

However, I feel that these quality ASX shares could be better ideas for income compared to NAB in terms of reliability.

Our Top 3 Blue Chip ASX Shares For 2019

You’re invited! For a limited time, The Motley Fool Australia is giving away an urgent new investment report detailing our 3 TOP BLUE CHIP SHARES to own in 2019.

So if you like trustworthy, stable, high-performing companies that pay fat fully franked dividends – we’ve got you covered!

Stock #1 is a beloved old Australian company turning its attention to high-margin businesses... and rapidly returning cash to shareholders with its hefty dividend...

While Stock #2 is an online powerhouse that’s rapidly gaining market share all around the globe... poised for years (or even decades) of tremendous growth...

Even better, Stock #3 offers a whopping 6.5% grossed-up dividend! Which beats the rates on term deposits right out of the water – and offers the potential for capital gains, too.

You can discover all three shares inside our new report right now. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a LIMITED TIME ONLY!

Simply CLICK HERE FOR YOUR FREE REPORT!

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now