For both institutional and 'mum and dad' investors whether or not to own big bank shares in 2019 is a burning question. After all their valuations have tumbled to make them look more attractive, but are rising costs, falling house prices and more regulation set to keep them under selling pressure?
Unfortunately there's no black and white answer to this question with even one of the world's most influential research houses in Goldman Sachs sitting on the fence.
According to a June 4 2019 research note out of the bank it has a "neutral" rating and $29.12 12-month share price target on Australia's second-largest bank Westpac Banking Corp (ASX: WBC).
This afternoon Westpac shares change hands for $28.14 meaning the shares only have 3.5% upside plus dividend payments if Goldman's analysis is on the money.
The analysts note that Westpac could be worth more than its price target if the bank delivers better-than-expected cost controls and profit margins or if house prices rebound. Downside risks include the housing market (!), and higher investment spends.
Based on a trailing dividend payout of $1.98 per share the shares yield 7% plus full franking credits.
However, investors must be careful as an excessively high yield like this is normally a sign that more sophisticated investors are expecting a dividend cut.
