NAB stock: Should you buy the 4.7% yield?

Do analysts think this banking giant is a buy for income investors?

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National Australia Bank Ltd (ASX: NAB) is a popular stock for income investors.

The banking giant features in countless income portfolios and superannuation funds across the country.

And this is for good reason.

As with the rest of the big four banks, NAB stock traditionally provides investors with dividend yields that are comfortably ahead of the market average. And who doesn't love a good yield!

But should buy the bank's shares now? Let's see what analysts are saying.

Should you load up on NAB stock?

Firstly, it is worth highlighting that NAB's shares have been on a strong run recently.

At present on Thursday, they are up almost 1% to $34.10. This means that year to date, the banking giant's shares are up approximately 11%.

This doesn't really make now an opportune to invest according to analysts. In addition, it has reduced the potential dividend yield on offer with its shares.

In respect to its dividend, according to a note out of Goldman Sachs, its analysts are forecasting a 4.7% fully franked dividend yield in FY 2024, FY 2025, and FY 2026.

Whereas if you had invested at the end of 2023 when NAB stock was going for $30.70, you would be looking at dividend yields of just over 5.2% per annum through to FY 2026.

Nevertheless, a fully franked 4.7% dividend yield is still above average and better than what you will receive from term deposits. In addition, with interest rates likely to fall next year, the yields on offer from fixed income products are likely to fall, making this even more attractive.

But should you buy NAB?

Well, at present Goldman Sachs has a buy rating on the bank's shares. However, the NAB share price has now surpassed the broker's price target of $33.73.

In light of this, now may not be the best time to invest and income investors may be better off keeping their powder dry and waiting for a better entry point.

Especially given that none of the other major brokers are tipping the bank as a buy. In fact, analysts at Citi put sell ratings on all the big four banks earlier this week on valuation grounds.

The broker has a sell rating and a $28.00 price target on NAB's shares, which implies a potential downside of almost 18% from current levels.

Elsewhere, Morgans has a hold rating on the bank's shares. But its price target of $30.02 still suggests that they could decline by 12% over the next 12 months.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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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