Is the National Australia Bank Ltd (ASX: NAB) share price a buy for the grossed-up dividend yield of 11.3%?
It offers the biggest yield compared to the other big four ASX banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ). So if all the banks just maintain their dividends for the foreseeable future then NAB's yield is the best.
However, a few analysts are predicting there might be a bit of a dividend cut in the near future.
Most investors wouldn't say that losing their CEO and Chairman is a good thing. At a big bank it might be less of an important factor because of how many other head of operations there are. For example, Mike Baird is currently the head of NAB's retail banking.
The AFR reported that Australian Foundation Investment Co. Ltd. (ASX: AFI) thinks NAB is a good pick because of the recent appointment of banker Mr Chronican as the current interim CEO and the soon-to-be Chairman. The high dividend yield was also an attraction for AFIC, along with the cheap price.
NAB is known for its business lending. I like that NAB is working closely with some of the best ASX growth shares like Afterpay Touch Group Ltd (ASX: APT), REA Group Limited (ASX: REA) and Xero Limited (ASX: XRO).
Despite the Royal Commission seemingly being a negative for the whole finance sector, AFIC thinks that the big four banks, including NAB, could gain a stronger market position compared to its smaller competitors.
However, the main thing that will help or hinder NAB's earnings is the Australian housing market, which is currently heading downwards by 1% a month.
Foolish takeaway
NAB is trading at 11x FY19's estimated earnings, so it does seem cheap. However, I would rather not buy shares at this point in the economic cycle.
