CBA streaks ahead - Back above $70

The prospect of a lift in second half dividends has seen investors flock to the Commonwealth.

The Commonwealth Bank has broken ranks with its Big Four counterparts after busting through the $70 a share barrier this morning.

Speculation of a lift in the full-year dividend, to be announced with the results on August 14, has attracted strong demand for the bank in the past fortnight. This morning its stock surged by 1.5% to $70.10

It now has recovered more than half the losses it incurred when all the banks retreated in the wake of Ben Bernanke’s suggestion in mid-May that an improving US economy may warrant a reduction in America’s money printing extravaganza.

After pushing through $73 in May, CBA shares slid heavily as international investors dumped Australian banks to limit their exposure to a falling Australian dollar.

This time last month, CBA had dropped to $65. Since then, however, despite some wild share price swings, the trend has been unmistakably northwards and gathering momentum this week.

In contrast, Westpac, National Australia Bank and ANZ each have made only tentative gains from last month’s lows.

ANZ has been the better performer of the three, lifting from $26.80 to $28.60 as it pushes back towards its $31.00 peak.

NAB, on the other hand, has risen to just $29.30 from a $28 low last month, well short of its $34 peak in May. Similarly, Westpac has recovered to $28.75, up around $1 from last month but well down on its $34 May.

The allure of a lifted dividend – forecast to possibly rise 7.5% to $2 a share for the second half – is driving investor demand for CBA shares (see John Abernethy's Bank stocks a hold strategy).

That would see the full year dividend rise to $3.64 which, when combined with the weaker share price, has dramatically lifted the yield prospects.

A combination of cheap cash and the clear signs of a housing recovery, particularly in the eastern states, has sparked hopes that the anaemic credit growth of the past two years may help lift bank revenues.