NAB’s CEO is buying shares at decade low prices. Should you take the hint?

The National Australia Bank Ltd. (ASX: NAB) share price closed today’s trade at $15.75.

Sure, this share price isn’t quite as low as the levels we saw in March when NAB shares reached $13.20. But it’s still not far from a level that, until March, we hadn’t seen this century. That’s right, you have to go back to 1996 to find a time when NAB shares plumbed the depths they found 2 months ago.

Even during the global financial crisis, which hit bank shares particularly harshly, NAB shares didn’t see a share price with a 13 at the beginning.

So we already know this ASX bank has been a lousy investment over the past two and a half decades, even with the healthy dividends NAB used to pay. It’s not often you can say you bought a company that went backwards over 25 years.

But it’s still one of the largest companies in Australia, has a virtual government guarantee and a formidable market share in the ASX financials sector.

So is the NAB share price in the buy zone today?

Are NAB shares in the bargain bin?

Well, the first thing to note is that no one should be expecting much in the way of dividend payments in 2020.

Yes, unlike NAB’s compatriots Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group Limited (ASX: ANZ), NAB will be paying a 30 cents per share interim dividend in July.

But NAB’s past payments make this look like a pittance. Shareholders were treated to an annual dividend of $1.98 per share in 2018. Last year, investors received $1.66 per share in payments. This year, it looks as though NAB shareholders will be lucky to receive 60 cents per share. That’s a 66.7% cut over 2 years – although I’m not blaming NAB entirely for this, due to the impacts of the coronavirus on the economy.

Still, if an investor bought in at the current NAB share price, this new dividend would translate into an annualised yield of 3.8%, which isn’t really anything to write home about.

However, these dividends are likely to recover somewhat over time. It’s hard to say how much though – that depends on consumers returning to the credit markets in the months and years ahead, as well as what interest rates end up doing.

One investor who’s bullish on NAB shares is Nab’s own CEO, Ross McEwan. Mr McEwan recently picked up 47,500 shares worth around $731,500 (at the time) earlier this month. It’s always nice seeing a CEO put their money where their mouth is.

Foolish takeaway

In time, I think the NAB share price will recover from the lows we see today. However, I’m not in a rush to add to my existing NAB shares alongside Mr McEwan, even at these depths. There’s a lot of uncertainty in the future of the ASX banks, and I’m not confident that the heavy headwinds the sector is facing have a clear end in sight. Thus, I think there are better places to put your money in this market.

More reading

• These are the latest ASX shares to be upgraded by brokers to buy
• ASX 200 up 1.7%: Flight Centre and Webjet rocket, Afterpay hits record high
• ASX 200 Weekly Wrap: ASX rallies on mining highs
• Where to invest $5,000 in ASX 200 shares immediately
• Is the NAB share price a buy today?

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post NAB’s CEO is buying shares at decade low prices. Should you take the hint? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3d2gdin