Would it be a good idea to buy $1,000 of Westpac Banking Corp (ASX: WBC) shares?
Westpac Banking Corporation, more commonly known as Westpac, is one of Australia’s ‘Big Four’ banks and a financial-services provider headquartered in Sydney. It is one of Australia’s largest lenders to homeowners, investors, individuals (via credit cards and personal loans) and business.
Time To Buy Westpac Shares?
One of the main reasons that investors decide to buy Westpac shares is for the income. Banks generally trade at a low price/earnings ratio.
And our banks like Australia and New Zealand Banking Group (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA) also pay out a high level of their cash earnings each year as a dividend.
That combination of a low p/e ratio and a high dividend payout ratio means Westpac has a fully franked dividend yield of 6.3%, or 9% with franking credits.
That means that if you were to buy $1,000 of Westpac shares you might get $90 of dividend income.
But dividend income is not guaranteed, it isn’t like interest from a bank account. National Australia Bank Ltd (ASX: NAB) recently cut its dividend in its result and some investors that Westpac may do the same. So maybe we should count on something like $80 of dividend income from $1,000 of Westpac shares over the next year.
The bigger question is whether Westpac is the best investment to make with $1,000. It’s true that the housing market is turning round after a year or so of declines.
But is a bank, which is already a huge $100 billion giant, going to produce good growth compared to other investment ideas? Even the biggest businesses like CSL Limited (ASX: CSL) and Macquarie Group Ltd (ASX: MQG) could be better ideas for the next decade.
But the reliable and growing shares in the free report below could be a better place for a $1,000 investment for at least the next few years.
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