Bank of Queensland Ltd (ASX: BOQ) shares have been flying under the radar these past twelve months, shadowed by the share prices of the other banking majors.
But with shares fetching $6.36 at the time of writing after climbing nearly 4% in the past month, the bank stock is now trudging back towards its 52-week highs, as seen in the chart below.
With the stock shifting back to its previous highs, many investors may be wondering if now is the time to grab this ASX bank – and if it's the right price.
Let's see what the experts think about Bank of Queensland shares.
Starting valuations on Bank of Queensland shares
Bank of Queensland trades on a price-to-earnings ratio (P/E) of around 16 times at the time of publication, just behind the S&P/ASX 200 Index (ASX: XJO)'s 18 times.
Compared to the big four, only ANZ Group Holdings Ltd (ASX: ANZ) is cheaper at 13 times P/E.
According to CommSec, the consensus of analyst estimates projects the bank to produce 48.2 cents in earnings per share (EPS) this year.
If it does produce this figure, and investors continue to pay the current P/E multiple of around 16 times, the stock is worth $7.70 under these assumptions (15.96 x 0.482 = $7.70).
This is a further 21% upside potential from the current share price.
But if the multiple contracts, to say, 15 times, this implies a market value of $7.32 apiece – still 12% upside potential.
In my view, this bodes well for the Bank of Queensland share price. Now it's just up to the bank to meet the consensus estimates.
What about dividends?
It's not all about earnings when evaluating ASX bank shares. Dividends play a part in the calculus too.
Bank of Queensland may not have the heft of the big four, but it makes up for it with a hefty dividend yield.
At its current share price, BOQ is offering a trailing dividend yield of 6%, which jumps to 8.5% with all franking credits. In my view, this is a talking point for those seeking passive income from ASX shares.
Looking ahead, consensus forecasts the bank to pay an annual dividend of 33 cents per share in FY24, providing a yield of around 5.1% based on today's share price.
In FY25, the dividend is expected to increase to 34 cents per share, maintaining the same yield.
Not all roses for Bank of Queensland shares
Despite the tempting dividend, UBS has a sell rating on Bank of Queensland shares with a price target of $5.50.
This implies a potential downside of over 13% from current levels. UBS' concerns centre around pressures on BOQ's net interest margin (NIM) and the potential for unexpected cost increases.
In the first half of FY24, BOQ saw its NIM slip by 3 basis points to 1.55%, while cash earnings dropped 33% to $172 million.
Even so, UBS forecasts that BOQ's net profit will bounce back, forecasting 8.8% growth in FY25 and a further 14.4% rise in FY26.
The broker also notes that capital returns — in the form of dividends — could provide some upside.
Foolish takeaway
Bank of Queensland shares offer a compelling dividend yield, but the question is whether we can get them for cheap.
When combining the discounted P/E and the current dividend yield, the stock looks relatively cheap, in my view.
