How To Buy Westpac Shares

Westpac Banking Corporation’s share price history is marked by ups and downs, especially in recent years. Founded in 1817 as the Bank of New South Wales, Westpac is Australia’s oldest bank and one of its largest. In 1982, following the merger with the Commercial Bank of Australia, it changed its name to Westpac Banking Corporation. On 23 August 2002, Westpac registered as a public company limited by shares under the Australian Corporations Act (2001).

In the early 2000s, Westpac’s share price experienced a steady uptrend, culminating in an all-time high of around $40 in 2015. However, Westpac’s share price is not immune to fluctuations.

During the Covid-19 pandemic, the shares took a significant hit, falling as low as $14 before rebounding. However, since the initial V-shaped recovery from the pandemic-era bottom, the stock has been bouncing between the high and low $20 range, gradually trending down over the past two years. By September 2023, Westpac (WBC) shares are priced at $21.18, but by March 6, 2024, it has risen to $26.88 with a market capitalisation of $93 billion, a dividend yield of 5.28%, and a P/E ratio of 9.36. The average dividend yield over the last five years is 5.16%

This historical context of the share price is important for potential investors to understand, as it reflects the company’s resilience and ability to recover from economic downturns, as well as its current position and potential for growth.

Investing in stocks is a critical financial decision. With a company as large and influential as Westpac, there are several factors that potential investors should consider before making a decision.

1. Understand the financial metrics:

• P/E Ratio: The price-to-earnings ratio is calculated by dividing the current share price by the earnings per share (EPS). A lower P/E ratio could mean the stock is undervalued, while a higher P/E ratio might indicate overvaluation. As of 1st September, Westpac’s P/E ratio is 9.36. It’s essential to compare this ratio with other companies in the same industry or the broader market to get a sense of its relative value.
• Dividend yield: The annual dividend payment is divided by the share price. Westpac’s dividend yield as of March 6, 2024, is 5.28%. This is an attractive yield, but it’s also important to consider the company’s ability to sustain this level of dividend payment.
• Market capitalisation: Westpac’s market cap as of March 6, 2024, is $93 billion, making it one of Australia’s largest publicly listed companies. A larger market cap often implies a more stable and established company.

2. Consider the broader economic environment: The performance of banking stocks is often closely tied to the economy’s overall health. Factors such as interest rates, inflation, and the housing market can significantly impact Westpac’s performance.

3. Research the company’s financials: Delving into Westpac’s financial statements is essential. Analyse its income statement, balance sheet, and cash flow statement. Look for trends in revenue, expenses, and net income. Also, assess the bank’s debt levels and its ability to manage them.

4. Consider historical performance: While past performance is not indicative of future results, it is helpful to understand how Westpac’s shares have performed over time. For instance, the Covid-19 pandemic saw a significant drop in Westpac’s share price, falling as low as $14.00. However, it has since rallied and is bouncing between the high and low $20s range.

5. Evaluate the competitive landscape: Westpac operates in a highly competitive environment, with three other ‘big four’ banks in Australia. It’s important to understand how Westpac differentiates itself from its competitors and its position in the market.

6. Decide how to buy:

• Brokers: A broker is a professional licensed to buy and sell shares on behalf of clients. They can provide personalised advice and investment recommendations. However, they typically charge higher fees for their services.
• Share trading platforms: These online platforms allow you to buy and sell shares directly. They usually offer lower fees than brokers, but you must do your own research and make investment decisions. Some popular share trading platforms in Australia include CommSec, Nabtrade, and eToro.

Using a broker may benefit those who prefer expert guidance and are willing to pay higher fees for personalised service. On the other hand, using a share trading platform may be more suitable for those who prefer to manage their own investments and are looking for a more cost-effective option.

7. Consult a financial advisor: If you are not confident in your ability to evaluate all these factors, it may be beneficial to consult a financial advisor. They can provide expert insight to help guide your investment strategy.

Remember, it is crucial not solely to rely on one or two indicators but to take a holistic view when evaluating whether Westpac shares are a good buy for you. Do thorough research, consider multiple factors, and align your investment with your financial goals and risk tolerance.

Investing in the share market has become more accessible than ever, but it’s important to approach it cautiously, whether you’re a novice investor or have experience in share trading. Before starting your investment journey with Westpac shares, here are the crucial steps to consider.

1. Do your own research

Take time to understand the mechanics of share trading, the specific industries you are considering investing in, and the performance of the business whose shares you wish to buy. Visit Westpac’s investor centre for information on the bank’s share price movements, overall strategy, and financial and operating performance.

If you are not confident after researching, seek advice from a certified financial advisor. They can provide expert insights to help guide your investment strategy.

2. Create and fund your brokerage account

After selecting the platform or broker through which you will invest, you need to open a brokerage account and transfer money into it to start investing. Most brokerage firms or online trading platforms will require some form of identification and a bank account linked to your brokerage account.

3. Determine an investment strategy

This involves deciding ‘when’ and ‘how much’ to invest. Predicting share market movements is challenging, but historical data and financial news can provide some insights into price trends.

Decide whether you want to invest a lump sum immediately or make smaller share purchases over time. Investing an amount you can comfortably afford is crucial, as purchasing shares in Westpac or any other publicly listed company does not guarantee a profit. Always maintain a buffer of emergency savings if an investment does not yield the expected financial outcome.

4. Place an order for Westpac shares

Depending on your broker or online platform, log into your account, select the number of Westpac shares you wish to purchase (or the amount of money you want to spend), and execute the trade. Ensure you have enough money in your brokerage account to cover the trade and the brokerage fees.

5. Review Westpac’s performance regularly

Share trading is not a completely passive income stream. It is essential to monitor the performance of all your investments to optimise returns. Make a habit of conducting a broad portfolio review monthly or quarterly. For assessing Westpac’s performance, revisit the reports at the Westpac investor centre.

The decision to sell shares requires careful consideration of various factors:

Evaluate your investment strategy: Ensure your decision aligns with your overall investment strategy. Are you a long-term investor, or are you looking for quick profits? If Westpac’s performance doesn’t align with your goals, it might be time to consider selling.

Analyse Westpac’s performance: Regularly review Westpac’s financials, strategies, and any news that might affect its stock price. If the bank’s performance doesn’t meet your expectations, or if there is negative news or trends that could affect its future performance, you may wish to adjust your portfolio.

Consider the tax implications: Selling shares has tax implications. In Australia, you may be subject to capital gains tax on any profit made from selling shares. Understand the tax implications and consult a tax professional if necessary.

Don’t chase highs and lows: Avoid getting caught up in the excitement of the stock market and being tempted to panic-sell when the price is low. Market fluctuations are normal, and staying focused on your long-term investment goals is important.

If you have decided to sell your Westpac shares, here are the steps you need to follow:

1. Placing a sell order: Log into your trading account, navigate to your portfolio, select the Westpac shares you wish to sell, and place a sell order. You can choose to sell your shares at the current market price (market order) or specify the minimum price you are willing to accept (limit order).
2. Check fees: Be aware that you may incur fees when selling your shares. These fees vary depending on the broker or trading platform you are using.
3. Reinvest the proceeds: Consider how you will reinvest the proceeds after selling your shares. Will you reinvest in another stock, pay down debt, or keep the money in cash? Your decision should align with your overall investment strategy.

Remember, if unsure seek professional financial advice before making significant investment decisions.