Investors are witnessing another milestone in the financial world as the S&P/ASX 200 Index sets a new record high at 7,768 points. Notably, Westpac Banking Corp (ASX: ASX:WBC) follows suit with a fresh 52-week high, reaching $26.60 per share. The stock has shown remarkable growth, up by around 15% year to date in 2024 and an impressive (approximately ) 20% over the past 12 months. In this article, we explore the question: Is now the right time to buy Westpac shares?
A Trip Down Memory Lane
To grasp the significance of today's high, it's essential to reflect on Westpac's historical performance. Comparing the current AU$26.60 share price to previous peaks reveals that the bank has experienced more expensive periods. The bank reached AU$30 in the final months of 2019, AU$35 in early 2017, and even commanded a price close to AU$40 in 2015.
Considering these peaks, one might conclude that Westpac has historically struggled to compound its earnings effectively, resulting in a somewhat poor investment performance.
Evaluating the Present
Given the historical context, the question arises: is Westpac a good investment now? While the past 12 months have been favorable for Westpac shareholders, zooming out reveals a different perspective. The current 52-week high merely aligns with the stock's value in June 2021, indicating that, despite recent gains, it may not be expensive compared to historical peaks.
The banking environment also plays a role in this evaluation. Considering the current landscape, it appears that Westpac shares might not be the ideal choice for those aiming to match or beat the ASX 200 Index's performance.
The Allure of Dividend Yield
Despite the considerations around the stock price, Westpac's generous dividends present an interesting aspect for investors. With a dividend yield of 5.36% and full franking credits, the bank offers an objectively lucrative option, particularly for those focused on income within the upper echelons of the ASX 200.
While Westpac shares might not outperform the market at current pricing, they could serve as a valuable addition to a diversified, income-focused portfolio.