Tag: ASX:NAB

Shares of the National Australia Bank (NAB) are pushing back toward the $28.00 level after announcing that its final dividend will be unchanged at 99 cents per share as full-year cash earnings  rose 4.2% to $6.48 billion.

Forward guidance suggests a drop in FY17 dividend to 85 cents as bad and doubtful debt charges rose 7.0% to $800 million, expenses rose 2.2% and net interest fell to 1.88%. Based on these figures, the FY17 growth forecast of -1% is the lowest in the sector, which is likely to limit further out performance to peer banks in the near-term.

The forward guidance equates to NAB trading on a P/E multiple of 12x , which is a 6% discount to peers, and a forward yield of 6.2%

NAB is scheduled to report its FY16 result on Thursday and we’re expecting FY16 cash earnings of $6.4b. The final dividend will likely be around $0.98 fully franked & we continue to expect the dividend to be cut next year.

We are forecasting a 2H16 credit impairment charge of $500m which is an increase of $125m on the 1H16 number.

Based on a slight reduction in dividends the FY18 yield is 6.75%.

Selling covered calls at or near $28.50 into early next year, with a view towards collecting the upcoming dividend is our preferred strategy.