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Why the CBA share price is at a 3-year high

The Commonwealth Bank of Australia (ASX: CBA) share price has hit a new 52-week high today. CBA shares closed at $83.66 yesterday, but today opened at $84 and pushed up to the new high of $84.38 just after trading commenced.

The CBA share price has cooled slightly since and is sitting at $84.22 at the time of writing.

CBA shares haven’t seen these levels in almost three years – you have to go back to May 2017 to see the last time CBA was over $84. It is worth noting, however, that we are still a long way from Commonwealth Bank’s all-time high of $95.92, hit back in March 2015. That share price seems a distant memory, particularly given we saw CBA shares languish under the $70 mark in 2019.

Still, this morning’s gains mean that CBA shares have banked (no pun intended) a 16% gain in the last twelve months (not including returns from dividends).

Why is the CBA share price surging today?

As there is no major news out of Commonwealth Bank this week, in my opinion we can put this new high down to the substantial bullish sentiment that has gripped the ASX today. The waning tensions in the Middle East in the last week as well as the signing of a US–China trade deal today have dramatically boosted market sentiment. The S&P/ASX 200 (INDEXASX: XJO) has also hit some milestones this morning – decisively breaking through the 7,000 point ceiling for the first time.

CommBank is also benefiting from its status as the ‘golden child’ of the ASX banks at the moment. CBA was the only major ASX bank that didn’t cut its dividends or franking credits last year.

National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) both delivered hefty dividend trims to their investors in 2019, as well as a capital raise in Westpac’s case. Australia and New Zealand Banking Group (ASX: ANZ) kept its dividend steady, but scaled back the franking credits shareholders would receive with their dividends from 100% to 70%.

Meanwhile, CommBank stayed squeaky clean and maintained both its dividends and 100% franking.

That probably explains why the other 3 major banks are nowhere near their 52-week highs today, despite all 3 booking gains.

Where to next for CBA shares?

It’s worth noting that the new CBA highs have pushed CommBank;s dividend yield down to 5.12% at the current price. I don’t expect to see too much upside from here as any further appreciation would see CBA’s dividend yield fall even further, which would (in my opinion) probably draw income investors away to greener pastures with the other banks.

Still, this bank is a favourite for dividend income and looks set to continue to benefit in line with the broader market.

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Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. 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.

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