Part of what makes investing so difficult is the fact that the big financial media sites talk about the most popular stocks. For the average investor who doesn’t have hours to spend researching, they hear about these popular stocks and buy them. But if everyone is doing this, the price that investors pay for these shares can often times be a little more than they should.
There are dozens (if not hundreds) of hidden gems that just don’t see the light of day in the United States and Canada.
Bank of Montreal (TSX:BMO)(NYSE:BMO) is one of those companies. In comparison with the other Canadian banks, BMO just doesn’t get talked about a lot. And, in my opinion, that is a terrible mistake. But it is also a mistake that I’ve made myself.
Before I really dug deep, I focused on Bank of Nova Scotia and Toronto-Dominion. Now, I think that Bank of Montreal might be just the hidden gem investors have been waiting for.
Unlike some of the other banks, BMO is strategically diversified throughout the United States and Canada, which protects it from volatility in either country. And right now, the bank is increasing its exposure to the U.S. economy, which is smart because the United States is experiencing growth.
BMO recently announced that it was purchasing the Transportation Finance division from General Electric. This is huge for a couple reasons. First, BMO is acquiring $13 billion in loans in leases. Second, this division has 20% market share in the U.S. truck and trailer sector across North America. If the economy continues to get stronger in the United States, I expect this acquisition to generate significant revenue for BMO over the coming years.
Despite this strategically diversified business, it only trades at approximately 12 times its earnings. And if we look at its earnings going forward, if you bought shares today, you’d only be buying at approximately 10.5 times its earnings. Because of its growth in commercial lending, I have little doubt that it will hit those future earnings and potentially surpass them.
Another reason that BMO is such a great company is because of its dividend. The reality is, very few banks pay as much as BMO does. At its current price, it pays a yield of 4.45%, which comes out to $3.28 per share, per year.
But what makes the company even more special is the fact that it has not missed a dividend payment since your great-great-great-great grandfather was alive. In other words, it has not missed a dividend since 1829. World War I, the Great Depression, World War II, and the 2008 Financial Crisis all came and went, but BMO never missed a payment.
That proves that the company takes its investors seriously and, unless something truly catastrophic were to happen, it won’t stop paying. I like knowing that I’ll get paid by my job every two weeks, and I like knowing my investments won’t stop paying me.