Commonwealth Bank of Australia (ASX: CBA) is one of those shares that seems to divide investors more than almost any other on the ASX.
On traditional valuation measures, it's hard to argue the shares look cheap. Many analysts believe CBA is overvalued, especially compared to its major bank peers. Even so, I'm not selling my CBA shares, and I'm comfortable continuing to hold them.
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A bank that consistently outperforms
CBA has earned its reputation as Australia's highest-quality bank. Its scale, technology leadership, and dominant deposit base give it structural advantages that competitors struggle to match.
In a higher interest rate environment, that deposit strength matters. Banks with strong, sticky retail deposits are better positioned to defend margins, even as competition inevitably picks up. While mortgage pricing remains competitive across the sector, CBA has historically shown more discipline than most, prioritising returns over pure volume growth.
That discipline is a big reason the market continues to place a premium on the stock.
Valuation isn't the only consideration
If I were assessing CBA purely as a new investment today, I'd probably be more cautious. At around $161 per share, expectations are already high, and future returns may be more modest than they've been over the past few years.
But as an existing shareholder, the decision to sell isn't just about valuation. It's also about what comes next.
Selling shares that have appreciated significantly can trigger a sizeable capital gains tax bill. That's money that immediately leaves the portfolio and reduces compounding power. Unless I have a clearly superior alternative with a better risk-reward trade-off, I'm reluctant to crystallise gains just for the sake of it.
The dividend looks better than it appears
Another reason I'm happy to keep holding is the dividend.
At today's share price, CBA's yield might look relatively modest, particularly for new buyers. But for investors who bought two years ago, when shares were trading closer to $110, the yield on cost is far more appealing.
Add in full franking credits, and that income stream becomes even more attractive on an after-tax basis. For long-term investors who value reliable income, CBA continues to play an important role.
Steady returns in an uncertain environment
I don't expect CBA to deliver explosive growth from here. But I don't need it to.
What I value is consistency. CBA generates strong profits, maintains healthy capital levels, and has a proven ability to navigate economic cycles. Even as the banking sector faces margin pressure from competition and slower credit growth, CBA remains well-positioned relative to its peers.
In uncertain markets, there's something to be said for owning businesses you trust to keep delivering, even if the upside is incremental rather than dramatic.
Foolish Takeaway
Yes, CBA shares look expensive. But they're expensive because the business has consistently delivered.
Between the quality of the franchise, the tax implications of selling, and the ongoing appeal of fully franked dividends, particularly for long-term holders, I see little reason to rush for the exit. I'm not buying more at current levels, but I'm also not selling.
