Should I sell my CBA shares in May?

Commonwealth Bank of Australia (ASX: CBA) shares are trading in the red again on Tuesday.

At the time of writing, the ASX bank shares are down 0.74% to $170.94 a piece. Today’s slide means the shares have now shed 7% of their value since peaking at an annual high of $183.52, in mid-April.

CBA shares are now up 6% for the year to date and are 2% higher than this time last year.

Now many investors are questioning whether the bank shares will continue slumping. Or could there be more to come later this year?

Is there an upside ahead?

It’s been consensus for some time that the bank’s shares are overvalued relative to its peers, and that its bumper price tag isn’t supported by the bank’s business fundamentals. 

Market Index data shows brokers still rate CBA’s shares as a strong sell. The brokers they tip a potential downside of 24% to an average $129.82 12-month target price, at the time of writing.

TradingView data shows some analysts are even more bullish. Out of 16 analysts 14 have a sell or strong sell rating on the stock. Some think the shares could crash up to 47% to as little as $90 each over the next 12 months.

If analyst predictions are anything to go by, we can assume that the peak has well and truly passed for CBA shares.

But potential upsides and predicted share price targets aren’t the only reason that investors should consider when they’re thinking about selling up their CBA shares.

CBA is a classic passive income stock

Bank stocks are generally considered cyclical rather than classically defensive, but large-scale banking giants like CBA certainly have defensive qualities.

Banking and credit are usually seen as an essential service. This means the sector can remain relatively stable in times of economic volatility.

As a result, banks like CBA are able to record a consistent operational performance and earnings, even when markets are mostly weak. CBA’s latest results announcement was its  unexpectedly-positive half-year FY26 result in mid-February. 

The bank is huge, dominant, and highly profitable, which means investors generally consider it a safe haven when markets are unstable. Scarcity of quality stocks on the ASX also means investors tend to put major players, like CBA, on a pedestal. 

The bank is able to pay a good dividend to its shareholders, too. Its latest payment was a fully-franked $2.35 per share in late-March, which implies a dividend yield around 2.74% at the time of writing.

So, should I sell my CBA shares in May?

It looks like the CBA shares are on the way down. If the crash is as large as the experts expect, the drop could also affect the level of passive income that the bank pays its shareholders. 

Ultimately, selling CBA shares should depend on how many you hold and how long you expect to keep them for. If you rely on dividend payments this should also be taken into account.

Also keep in mind that ASX bank stocks are cyclical so even a near-term decline could rebound in the mid-term. I personally wouldn’t buy into CBA shares right now, but I’d think twice about selling up this month.

The post Should I sell my CBA shares in May? appeared first on The Motley Fool Australia.

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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.