ASX bank stocks have had a bad rap recently, and National Australia Bank Ltd (ASX: NAB) is no exception.
The big four majors are widely regarded as overvalued and due for a share price correction this year. And they’re firmly in the spotlight right now thanks to the Reserve Bank’s interest rate hike this week.Â
A shift in direction for interest rate projections, cost-of-living fears, mortgage competition, and valuation is creating widespread concerns among investors. And this is exacerbated following strong share price rallies last year.
Where are NAB’s shares now? And where are they tipped to go?
At the time of writing on Wednesday afternoon, NAB shares are 1.32% higher. They’re now 2.85% higher for the year to date and 11.48% above where they were this time last year.
But sentiment about the banking giant is incredibly mixed. TradingView data shows that 6 of 16 analysts have a sell or strong sell rating on NAB shares, while another 6 have a hold rating.
The 12-month target price also varies wildly. The maximum target price from analysts is $47 per share, which implies a potential 7.65% upside at the time of writing. Whereas others think the shares could crash to $28.79 this year. That implies a 34.06% downside from the current trading price.
So, why buy NAB shares?
There are other reasons besides share price upsides to buy NAB shares this year. Here are three of them.
- NAB shares offer a great passive income
ASX bank shares are usually seen as stable options for passive income. The NAB share price typically trades at a lower price-earnings (P/E) ratio than other sectors, which means investors are able to earn a higher dividend yield.
NAB paid an annual dividend per share of $1.70 in FY25, which was 1 cent per share higher than FY24. This is forecast to be $1.705 per share in FY27 and $1.72 per share in FY28. It’s not a huge increase, but it’s a steady one.
- The stock is defensive
The banking major is a fantastic defensive stock that is able to remain stable in times of economic crisis. The company has stable, recurring income, and while it is still sensitive to economic conditions such as interest rate increases and recessions, its income and scale make it a good, stable option over the long term.
- There is potential for valuation upside
There is potential that, if the interest rate environment stabilises in the near term, analysts will re-rate their outlook on major banks like NAB. That could help drive the share price higher for 2026.
The post 3 reasons to buy NAB shares in 2026 appeared first on The Motley Fool Australia.
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More reading
- What happened with the big four ASX 200 bank stocks like ANZ and CBA shares in January?
- Where I’d invest in ASX shares if the RBA increases the interest rate
- Buying NAB shares? Here’s the dividend yield you’ll get today
- UBS just rated ASX bank shares NAB, BOQ and Macquarie as a buy
- Top brokers name 3 ASX shares to buy next week
Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.