It's been a rough few months for the Commonwealth Bank of Australia (ASX: CBA) share price, to put it lightly. Since hitting a new record high of $192 a share back in June (which was the latest in a long line at the time), this ASX 200 bank stock has fallen dramatically.
Right now, CBA shares are going for $153.98 each, after getting as low as $150.48 last week. At the current pricing, Commonwealth Bank shares are down by a dramatic 19.8% from that all-time high we saw just a few months ago.
As we covered earlier this month, this share price dip has somewhat sweetened the deal for ASX dividend investors. After CBA's dividend yield fell to under 2.6% due to the record share prices seen earlier this year, the bank's yield has rebounded to over 3.1%.
When CBA shares were pushing those fresh record highs, it was almost common knowledge that they were, to put it lightly, a little too expensive. For one, CBA was trading on a price-to-earnings (P/E) ratio of close to 30, which is almost unheard of for a major bank anywhere in the world. Furthermore, Commonwealth Bank's dividend yield had not even been close to 2.6% in living memory.
So there were a few warning signs that the $192 price tag might not have been sustainable.
But what about now, with the bank in the low $150s? Does this new share price and higher dividend yield bring this ASX 200 bank closer to the buy zone for me?
At what price would CBA shares be a buy?
Unfortunately, CBA would have to fall by a whole lot more before it finds a place in my portfolio.
I am still at the stage of my investing journey where I prioritise obtaining the highest possible rates of return. CBA just doesn't fit the bill.
Last week, we went through some analyst predictions on the major ASX banks from Macquarie. The analysts mapped out CBA's earnings trajectory over the next three financial years, and it made for some sobering reading. Macquarie predicted that CBA's cash earnings per share (EPS) would rise 2% over FY2026 to $6.25 per share, compared to FY2025's levels. FY2027 would see growth of 1% to $6.32 in EPS, followed by 3% for FY2027 to $6.52.
That is anaemic by any measure. But particularly so for a bank that is still trading on an earnings multiple of over 25.5 right now.
Macquarie's analysts might be wrong, of course. But I suspect, given the maturity of CBA's business, that it won't be too far from what eventuates.
Commonwealth Bank remains a strong and reliable payer of fully franked dividends, though. To offset this lack of growth, I would consider buying this blue chip if I were offered a suitable level of income. But the dividend yield would need to be attractive.
I might consider adding this bank to my portfolio if it were trading on a dividend yield of at least 5%, preferably higher. But for that to happen, CBA shares would need to drop well below $100 each at the current payout level. I might consider buying at $90, which would yield a dividend of about 5.4% to an investor. But $90 is a long way from $153.98.
