Westpac Banking Corp (ASX: WBC) shares are a popular option for Aussie investors and feature in countless portfolios across the country.
But was the big four bank a good stock to hold in your portfolio in 2024? Let's crunch the numbers.
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Was it a good idea to own Westpac shares in 2024?
Firstly, let's take a look at what the S&P/ASX 200 Index (ASX: XJO) did during the 12 months.
The benchmark index rose approximately 7.5% to 8,159.1 points in 2024 before dividends. And including dividends, the index delivered a return in the region of 11.2%.
This is ahead of the historical average return for investors which is roughly 10% per annum.
Did Westpac shares beat the market?
The good news for Australia's oldest bank's many shareholders is that Westpac didn't just beat the market, it hit it for six in the style of Sam Konstas.
Big returns for shareholders
The Westpac share price ended 2023 at $22.90 and then went on an almighty rally to finish last year at a lofty $33.32.
That's a stunning return of almost 46% for investors over the period and doesn't include dividends.
In FY 2024, Westpac paid out two fully franked dividends to shareholders. This was a 90 cents per share interim dividend (including a 15 cents per share special dividend) and a 76 cents per share final dividend.
Based on its starting price, this equates to a very generous 7.2% dividend yield for 2024, which boosts the total return to approximately 53% for the year.
To put that into context, a $20,000 investment in Westpac shares at the end of 2023 would have been worth approximately $30,600 a year later with dividends reinvested.
This is more than four times greater than the return of the market over the same period.
Why did its shares outperform?
Westpac and the rest of the big four banks have been on fire over the past 12 months with investors flooding back into the sector and driving their share prices higher.
This was driven by better than expected results in FY 2024 and the belief that the banks have escaped the RBA's interest rate hike cycle without experiencing any meaningful increase in bad and doubtful debts.
In respect to Westpac's results, in FY 2024, Westpac reported a 3% increase in net interest income to $18,916 million and a 3% decline in net profit to $6.99 billion. It also announced a $1 billion share buyback.
What's next?
One leading broker believes that Westpac shares can beat the market again in 2025.
A note out of UBS last month reveals that its analysts have put a buy rating and $37.00 price target on them. This implies potential upside of 13% for investors.
