Profit up 26% + 7% yield + buyback. Interested in this ASX 200 dividend stock?

One expert says these shares are going for 'cheap', even though the future looks pretty good for the business.

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If a company posts a 26% upgrade to its net profit, pays out a fully franked 6.7% dividend yield, and is about to embark on a $1.5 billion buyback, what would you think?

You'd have to consider adding it to your portfolio, is what you should be thinking.

Westpac Banking Corp (ASX: WBC) does all of the above, and Ord Minnett senior investment advisor Tony Paterno reckons the S&P/ASX 200 Index (ASX: XJO) stock is ripe for picking up now.

"The fiscal year 2023 result was largely in line with expectations," Paterno told The Bull.

"The bank posted a net profit of $7.195 billion, up 26% on the prior corresponding period."

Underperforming dividend stock ready to turn it around

It is fair to say Westpac shares have performed poorly in recent times.

Over the past year the stock has tumbled 10.5%, while going back five years the share price has dived more than 18%.

Compare this to its fellow major banks over the last half-decade:

  • Commonwealth Bank of Australia (ASX: CBA) up 45%
  • National Australia Bank Ltd (ASX: NAB) up 14%
  • ANZ Group Holdings Ltd (ASX: ANZ) down 9%

Paterno reckons this presents investors with an enticing entry point for Westpac shares right now.

"We believe the shares are cheap as they were recently trading on a modest forward price-earnings (P/E) ratio."

Westpac's numbers are bullish to Paterno.

"Credit stress in the home lending book remains low, with 90-day mortgage delinquencies trending back to September 2019 levels," he said.

"Westpac announced a $1.5 billion buyback. The recent fully franked dividend yield of 6.6% is attractive."

Last week The Motley Fool's Bernd Struben named Westpac as a dividend stock he would buy to construct a portfolio capable of producing healthy passive income.

"There are a lot of quality dividend stocks to consider. My preference goes to larger stocks… Particularly those companies with a reliable track record of paying fully franked dividends," he said.

"The franking credits should give me some tax advantages. And the reliable track record decreases the odds that my passive income will unexpectedly get cut."

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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