After a stellar run for most of the year, the big four banks have been a major drag on the ASX over the last few months.
Dividend cuts from National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) as well as franking credit cuts from Australia and New Zealand Banking Group (ASX: ANZ) were the first thing to take the shine off. But with the criminal allegations against Westpac that came out last month, the banks’ stars have well and truly fallen.
In fact, both Westpac and ANZ are trading at their lowest levels in a year, with NAB not far off either.
The glowing exception has of course been the Commonwealth Bank of Australia (ASX: CBA).
CBA shares are still up nearly 12% for the year, and another 6% gain would put CBA at a 52-week high. For comparison’s sake, Westpac would need a 25% boost to hit its own 52-week high watermark.
Commonwealth Bank has been the only ASX bank to keep its shareholder payments steady this year with no dividend cuts or franking reductions in sight.
Unlike Westpac, CommBank is also not expected to have to raise capital anytime soon – a claim that I’d wager NAB can’t make with the same conviction.
Is CBA a buy today?
I’m not bullish on the near-term prospects for our ASX banks. Record low interest rates and sluggish wage growth are damaging the banks’ profitability and I don’t see this easing anytime soon. However, if I had to choose a ‘big four’ bank to buy today, it would probably be CBA. I think the bank’s current dividend yield of 5.44% is very attractive from an income perspective, especially if you include full franking for a grossed-up yield of 7.77%.
Even if CommBank is forced to cut its dividend in 2020 (which is still a distinct possibility), it’s likely CBA shares will still offer a market-beating yield.
If you’re looking for more exposure to the ASX banking sector, then I think CommBank remains the best bet going into 2020. I don’t see much upside in the CBA share price going forward though.
The post Is CBA the best ASX bank share for 2020? appeared first on Motley Fool Australia.
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Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019