Can Bendigo & Adelaide Bank Outperform in the ASX200? A Look at Dividend Valuation

May 08, 2025 02:07 PM AEST | By Team Kalkine Media

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Highlights

Bendigo & Adelaide Bank's (BEN) valuation assessed using earnings and dividend models

PE ratio shows a valuation gap compared to sector average

Dividend-based model suggests possible value upside

Among Australia's notable ASX dividend stocks, Bendigo & Adelaide Bank (ASX:BEN) continues to attract attention from income-focused investors. The bank, a well-known name in the mid-tier banking segment, offers consistent dividends—often fully franked—which adds to its appeal within the broader ASX200.

Valuing bank stocks like BEN can be approached in multiple ways. One common method is through the Price-to-Earnings (PE) ratio. This ratio compares a company's current share price to its earnings per share. Based on recent full-year data, BEN reported earnings per share of $0.87. With a current share price of $11.48, the PE ratio stands at approximately 13.2x. In comparison, the broader banking sector average sits at around 18x, suggesting a potential gap in valuation.

To put this into perspective, applying the sector average PE ratio to BEN’s earnings yields an adjusted share value of $15.56. This approach uses mean reversion principles, assuming BEN may eventually align more closely with its peers.

Another common method for evaluating dividend-paying companies like BEN is the Dividend Discount Model (DDM). The DDM is well-suited for stable, mature businesses—such as those found in the ASX200—that offer consistent dividend payouts. This method estimates a company's share value by forecasting future dividends and discounting them to present value.

Using last year’s dividend of $0.63, with a conservative growth assumption and a range of discount rates (between 6% and 11%), the average estimated valuation comes out to approximately $13.32. If an adjusted dividend of $0.65 is used, this estimate rises to $13.75. For eligible shareholders considering the benefits of franking credits, the gross dividend forecast of $0.93 boosts the potential value to around $19.64.

Bendigo & Adelaide Bank’s dividend history positions it well among other ASX dividend stocks, especially in a climate where steady income streams are highly regarded. For further insights on ASX-listed dividend-paying companies, see the full list of ASX dividend stocks here: ASX dividend stocks.

While these models offer useful tools to assess valuation, it’s important to pair them with thorough research and an understanding of broader market conditions, especially within the context of the ASX200 landscape.

In comparison, other regional banks such as Macquarie Group (ASX:MQG) and Bank of Queensland (ASX:BOQ) offer similar avenues for evaluation, each with its own performance metrics and market positioning.

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