Recent falls in the price of Commonwealth Bank shares have made them a more attractive buy in terms of dividend yields.
UBS, in a note to clients, says it’s always been a supporter of CBA’s business, franchise and market position.
“CBA has generally traded on very expensive multiples, which made generating a fundamental valuation near its share price challenging,” UBS says.
However, a 25% share price fall means the stock now has dividend yield of about 5.9%.
UBS has upgraded the bank from a Buy from Neutral and has a 12 month price target of $87. Yesterday the ASX rallied following Monday’s horror losses, it was up more than 2% to $74. Its 12 month high was $96.32.
The bank is raising $5 billion to meet stricter capital rules, the last of the big four banks to announce its plans to meet APRA requirements. About 71 million new fully paid ordinary shares, 4.3% of the company, are being issued.
The Commonwealth this month posted a record full year cash profit of $9.137 billion, up 5% on the $8.68 billion the previous year.
This chart shows CBA hitting a price earnings multiple of about 13.3, in line with its long term average since 1996:
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