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Highlights
- BOQ valuation estimated using PE and dividend models
- Sector comparison shows close alignment in earnings multiple
- Dividend outlook suggests value in current share price
Bank of Queensland (ASX:BOQ), a known name among ASX dividend stocks, has caught the attention of investors with its current share price hovering around $7.53. With a place in the ASX 200 index, BOQ stands out due to its reliable dividend history and consistent performance in the banking sector. But does the current valuation reflect the true worth of the stock?
One common valuation method applied to bank shares is the price-to-earnings (PE) ratio. This compares the share price to the company’s annual earnings per share (EPS). BOQ reported EPS of $0.41 for FY24, placing its PE ratio at 18.4x. The broader banking sector sits at a PE average of 18x, which implies that BOQ is relatively in line with its peers in terms of earnings valuation. When applying the sector average to BOQ’s EPS, the implied value of the stock comes in slightly lower at $7.32, indicating it is close to its intrinsic range.
Another model frequently used for dividend-paying stocks like BOQ is the Dividend Discount Model (DDM). This approach estimates share value based on expected future dividends and a discount rate reflecting risk. Using a recent full-year dividend of $0.34 and assuming moderate dividend growth with discount rates between 6% and 11%, the average valuation lands at approximately $7.19. Adjusting the dividend slightly to $0.35 increases the estimate to $7.40. However, including franking credits (gross dividend of $0.50), the DDM model suggests a much higher value of $10.57 — highlighting how tax-effective returns can impact perceived value for eligible shareholders.
For comparison, other regional banks such as Bendigo and Adelaide Bank (ASX:BEN) and Westpac Banking Corp (ASX:WBC) can offer a broader context when assessing sector positioning and dividend stability.
Investors considering options within ASX dividend stocks or those tracking opportunities in the ASX200 might view BOQ as a consistent performer with balanced risk.
While valuation models offer a useful starting point, a thorough review of annual reports, management commentary, and opposing analyst views remains essential. As with any financial decision, building a comprehensive picture leads to better long-term outcomes.
