BEN share price at $10: here’s how I would value them

Core Viewpoint - The valuation of Bendigo & Adelaide Bank Ltd (ASX: BEN) shares is a topic of interest for investors, particularly those seeking dividend income, with current share price around $10.38 and various valuation methods suggesting higher intrinsic values [1][11]. Group 1: Valuation Methods - The Price-Earnings (PE) ratio is a common valuation tool, comparing a company's share price to its earnings per share, with BEN's current PE ratio at 11.9x compared to the banking sector average of 18x, suggesting a sector-adjusted valuation of $15.85 [6][5]. - The Dividend Discount Model (DDM) is highlighted as a more effective valuation method for banks, relying on past or forecasted dividends and assuming consistent growth, with BEN's valuation ranging from $13.32 to $19.64 depending on the dividend and risk rate assumptions [7][12][11]. Group 2: Dividend Insights - Fully franked dividends are a significant factor in boosting BEN's share price, as they provide additional value to eligible shareholders through franking credits [12][3]. - The DDM approach considers the last year's dividend payment of $0.63, with adjustments leading to different valuations based on growth and risk rates, indicating the importance of dividend consistency in valuation [10][11]. Group 3: Market Context - The Australian banking sector is characterized by an oligopoly, with major players like Commonwealth Bank and National Australia Bank, making bank shares particularly attractive to investors [2][3]. - Despite attempts by international banks to penetrate the Australian market, their success has been limited, reinforcing the stability of local bank shares [3].