Is Bendigo & Adelaide Bank (ASX:BEN) Undervalued? A Deep Dive for ASX200 Investors and Dividend Seekers

Highlights

• BEN’s PE ratio trails sector average
• Dividend-based valuation shows higher potential
• One of the noteworthy ASX dividend stocks to watch

Bendigo & Adelaide Bank (ASX:BEN) has recently attracted the attention of market participants looking for potential value opportunities within the ASX200. With the broader market placing increased emphasis on financials and ASX dividend stocks, BEN presents a case worth examining through both earnings-based and dividend-based valuation models.

To begin with, it's essential to understand how the price-to-earnings (PE) ratio reflects market sentiment and valuation. The PE ratio of BEN currently sits around 13.1x, based on its FY24 earnings per share (EPS) of $0.87 and a share price of $11.42. This compares notably lower than the average PE of around 18x for its sector. If BEN were to trade at a PE in line with the sector average, the share price could be closer to $15.61 – a substantial upside from current levels.

Beyond earnings, dividend valuation is another lens through which bank stocks can be assessed. The dividend discount model (DDM) applies a risk-adjusted return expectation to forecast dividend payouts. Using a base dividend of $0.63 and an assumed average risk rate between 6% and 11%, this method values BEN shares around $13.32. If dividends grow or remain consistent, as the model assumes, the adjusted valuation rises to $13.75.

Interestingly, factoring in BEN’s fully franked dividends through grossed-up projections (including franking credits), the valuation stretches even further to $19.64. That puts Bendigo & Adelaide Bank comfortably within the watchlist for those interested in ASX dividend stocks.

Given its presence in the ASX200 index and its attractive dividend profile, the bank stands out as one of the key financial institutions under consideration for long-term income-focused portfolios. (ASX:BEN) remains an important player in the domestic lending and regional banking space.

However, as always with banking stocks, other financial health indicators warrant monitoring – including net interest margins, loan growth, and the ability to adapt to shifting regulatory and fee-income structures.

For those tracking opportunities across the broader ASX200 index, understanding the comparative value of institutions like BEN may offer clearer insights into market segments benefiting from cyclical shifts in economic and monetary conditions.