WBC share price on the rise

This graph shows the comparative performance of WBC, CBA, NAB and ANZ since July 1st.

Source: Google Finance

Westpac (WBC) is the clear leader with its share price now higher than where it was on July 1st.
ANZ by comparison is still lower by 13%

Dividend yields of top 10 ASX

1.   BHP    9%
2.   NAB   6.6%
3.   ANZ   6.5%
4.   WBC  5.7%
5.   WOW 5.7%
6.   TLS    5.6%
7.   CBA   5.2%
8.   WES   5.2%
9.   MQG  4.4%
10. CSL    1.6%

• BHP leads the list with the growing likelihood that its dividend will be cut.  A decision on this is not expected until February and commodity prices can fluctuate dramatically in the space of two or three months
• NAB and ANZ have yields of about 6.5%.  There is also talk that their dividends could be cut due to the large capital raisings this year.  This is looking increasingly unlikely in the short term as their share prices have rallied over the last couple of weeks.
• WOW 5.7%.  Who knows what will happen with WOW.  Who will the new CEO be? What will happen to Masters?  What will happen to Big W?  Will second quarter sales be positive?  
• MQG and CSL with lower yields have been by far the best share price performers over the year.

Top 10 ASX by market cap - November changes

                 Nov 9th         Nov 30th

1.   CBA     130b              136b

2.   WBC    100b              107b

3.   ANZ     74b                79b

4.   NAB     74b                78b

5.   TLS      64b                66b

6.   BHP     70b                59b

7.   CSL     44b                46b

8.   WES    43b                43b

9.   WOW   30b                30b

10. MQG    27b                28b

• The big four banks have all increased their market cap over the last three weeks.
• ANZ has just edged ahead of NAB
• BHP has lost 11b in market cap in the last three weeks
• WES and WOW both remain unchanged.

Buy and hold Westpac?

With the slide in the share price of BHP the big four banks take out the top four positions of largest companies on the ASX measured by market capitalisation.  And by a fair bit too with Commonwealth Bank (CBA) being twice the size of Telstra (TLS).  That's despite some decent falls in their share prices since April.  And that's all everyone wants to talk about "How far they've fallen since April." Not that this isn't important but what if we look further back.  Much further back.

Take Westpac (WBC) for example.  Here's a monthly chart going back to the beginning of 2009.

Source: Yahoo Finance

Since March 2013 (roughly two and a half years) they have been going sideways trading between a range of $30 to $35.  There was a descent spike out of this range at the beginning of the year with the price almost touching $40.  Everyone seems to conveniently forget that the falls in April, May and June were matched by gains of a similar magnitude at the beginning of the year.  So the only people nursing descent capital losses are those who bought in February, March and April.

The period from July 2009 to September 2012 also saw plenty of sideways movement trading between roughly $20 and $25.  That's a bit over three years.  After that 11 consecutive monthly gains saw the price shoot from $20 to $30.

So what does this all mean.

Despite the hysterical headlines its business as usual for the Westpac share price.  Despite a capital raising and recently going ex dividend the share price remains above $30 within its two and a half year range.

With sentiment currently poor one would expect it to stay in this range for some time.  However if you believe that Australia will avoid a recession, that unemployment will remain around 6% and economic growth is going to pick up you would have thought there is more upside than downside in the share price.

Top 10 ASX by market cap

1. CBA 130b
2. WBC 100b
3. NAB 74b
4. ANZ 74b
5. BHP 70b
6. TLS 64b
7. CSL 44b
8. WES 43b
9. WOW 30b
10. MQG 27b

• The big four banks still easily account for the bulk of the market.
• ANZ has slipped the most of the four banks
• BHP has fallen from 2nd to 5th in a year (share price down 30% in a year)
• Macquarie (MQG) the biggest gain (share price up 30% in a year)
• CSL continues to move up (share price up 20% in a year)

ANZ NAB WBC ex dividend dates approaching

With the full year results finished for three of the big four banks that means ex-dividend dates are fast approaching.  As has been noted previously there has been no run up in their share prices this year as return on equity slips, dividends remain stable and margins come under pressure.

Clancy Yeates and James Eyers writing for BusinessDay have summarised it all pretty neatly this morning.  They've included a few useful graphs looking at return on equity, net interest margins and bad debt expenses going back a number of years.

ANZ
Ex dividend date 5th Nov 2015
PE ratio down to 10
Dividend yield 6.7% fully franked

NAB 
Ex dividend date tomorrow (4th Nov 2015)
PE ratio 12
Dividend yield 6.6% fully franked

WBC
Ex dividend date 10th Nov 2015
PE ratio 13
Dividend yield 6% fully franked

ANZ continues to offer the best value and some would argue the higher risk.
Unless ANZ has a bit of a bounce today or tomorrow its share price could be testing its 52 week low later in the week.

Westpac results - No surprises here

Westpac today rounds off the full year results after ANZ and NAB last week.

• Cash earnings $7.82 billion up 3%
• Final dividend 94c per share fully franked
• Return on equity 15.8% down 57 basis points

No surprises as most of the results were released two weeks ago when it announced the equity raising.

On Friday we had a look at how the share prices of ANZ and NAB were responding to their respective results.  They each lost 2% on the day the results were announced and then had steeper falls the following day.  And today Westpac is following the same formula being down 2%.  Maybe some steeper falls tomorrow?


Despite this, their shares are still trading comfortably above the retail entitlement offer price of $25.50.

Final musing:  Return on equity may be down a bit but 15.8% is still pretty healthy.

Bank dividend yields

Yesterday we looked at the PE ratios of CBA, WBC, NAB and ANZ and noted that ANZ is lagging behind the other three.  Whether it is a sign of good value or trouble ahead for ANZ is the question.

So what about their dividend yields.

1. ANZ 6.3%
2. NAB 6.2%
3. WBC 5.8%
4. CBA 5.4%

ANZ is certainly struggling for sentiment in the market with the lowest PE ratio and the highest dividend yield.

Ex-dividend dates are approaching for ANZ, NAB and WBC.  The traditional run-up of share price leading up to the ex-dividend date seems rather lack lustre this year.  One wonders whether yields of ANZ and NAB could soon be approaching 7%.

CBA still appears to be in a class of its own.  Its return on equity is still well ahead of NAB, WBC and ANZ.

10 year return on CBA, WBC, ANZ, NAB

Most market commentary is based on the short term.  Up one day, down the next or percentage returns for the year.  Let's look further back...  say 10 years for example.
10 years ago takes us to October 2005.  GFC is still a few years off.
These are the percentage returns (excluding dividends and franking) over a 10 year period.

Source: Google Finance

Was interesting to see how they are currently nicely spaced apart.

• NAB has gone nowhere over 10 years
• ANZ is up about 25% over 10 years
• WBC is up about 50% over 10 years
• CBA is up about 100% over 10 years

Banks show steady gains after raisings.

And so Westpac (WBC) is the final of the big four to conduct their $3.5bn entitlement offer.
Surprised a few by sneaking it in before the annual results.  Raising fairly small amount at offer price of $25.50 on a 1 for 23 basis.

So how are NAB, CBA and ANZ travelling after their raisings?

• NAB offer price $28.50   Currently up over 10%
• CBA offer price $71.50   Currently up over 7%
• ANZ offer price $26.50   Currently up over 8%

With sentiment in the market slowly improving one imagines demand for WBC will be fairly high.