NAB share price at $44: here’s how I would value them

Core Insights - National Australia Bank Ltd (NAB) shares are currently priced around $44, raising questions about their true value and potential for dividend income [1] - The financial/banking industry, including NAB, is favored by Australian investors, particularly for its dividend offerings and the oligopolistic market structure [2][3] Valuation Models - The Price-Earnings (PE) ratio is a common valuation tool, comparing a company's share price to its earnings per share, with NAB's current PE ratio at 19.4x, slightly above the sector average of 19x [4][6] - A sector-adjusted PE valuation for NAB, based on its earnings per share and the average PE ratio, results in a valuation of $43.83 [6] - The Dividend Discount Model (DDM) is highlighted as a more effective valuation method for banks, relying on past and forecasted dividends [7][8] DDM Valuation Results - Using a DDM approach, NAB shares are valued at $35.74 with a blended growth and risk rate, and $36.16 with an adjusted dividend payment [11] - When considering fully franked dividends, the valuation increases to $51.66 based on a forecast gross dividend payment of $2.44 [12] Growth and Risk Considerations - Various growth and risk rate scenarios yield a range of valuations, indicating the sensitivity of share price to these assumptions [13] - Investors are encouraged to assess NAB's growth strategy, economic indicators, and management team before making investment decisions [14]