CANBERRA: The Commonwealth Bank of Australia (ASX: CBA) share price has fallen recently and boosted its dividend yield. At today’s prices, analysts are forecasting yearly dividends of $4.24 per share. That equates to a dividend yield of 5.2% at today’s prices. However, using last year’s dividend payments, it’s a 5.1% dividend. Analysts appear to be positive on CBA’s growth outlook. According to Morningstar data, the consensus view from analysts is that profits will grow 12% over the next three years. But with just one-quarter of analysts rating CBA shares as a buy, according to The Wall Street Journal, perhaps that growth is not good enough. Indeed, there’s a lot to like about owning CBA shares over the long term, including a historically consistent dividend payment.
Aside from that, the bank is highly regulated by APRA and closely followed by analysts, ensuring that it is held accountable to its thousands of shareholders. It is also Australia’s largest and most profitable retail bank. All of these things mean that income-focused investors are often well rewarded with dividends and modest growth. However, CBA shares do not appear cheap. Although it is a top bank, leading its peers in many key areas, its premium valuation is questionable at this time. Especially when we consider the recent rise in house prices, a large amount of household debt and slow wages growth. These issues are likely to also affect CBA’s competitors, such as Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB). However, investors need to be careful of changes in the economy because bank profits are very sensitive to it.
