BEN share price at $11: here’s how I would value them

Core Viewpoint - The article discusses the valuation of Bendigo & Adelaide Bank Ltd (ASX: BEN) shares, highlighting the importance of understanding their true worth, especially for dividend-seeking investors. Group 1: Valuation Methods - The price-earnings (PE) ratio is a common tool for valuing shares, comparing a company's share price to its earnings per share. For BEN, the current PE ratio is 12.5x, compared to the banking sector average of 18x, suggesting a sector-adjusted valuation of $15.80 [4][6]. - A dividend discount model (DDM) is presented as a more effective valuation method for banks, relying on past or forecasted dividends and a risk rate. The DDM valuation for BEN shares, using a last year's dividend of $0.63, yields a valuation of $13.32, while an adjusted dividend of $0.65 results in $13.75 [7][11]. - Considering fully franked dividends, the valuation based on a gross dividend payment of $0.93 results in a share price valuation of $19.64 [12]. Group 2: Investor Preferences - Bank shares, including those of Bendigo & Adelaide Bank, are favored by Australian investors due to their potential for dividend income and franking credits [2][3]. - The financial sector, particularly the banking industry, is a popular investment choice alongside technology and industrial sectors, with the largest banks operating in an oligopoly [2]. Group 3: Economic Considerations - Investors are encouraged to consider the bank's growth strategy, focusing on lending versus non-interest income, and to analyze economic indicators such as unemployment, house prices, and consumer sentiment [14].