Investors are always told to diversify their portfolio, to pick the preferred option from a handful of companies within a particular industry, rather than every company. When it comes to the financial segment, there’s no shortage of companies to choose from, with most investors opting to invest in one or more of the Big Five banks.
Bank of Montreal (TSX:BMO)(NYSE:BMO) is one of the Big Five that doesn’t get the fanfare of some of the other banks that are either covered more frequently or have larger market caps. BMO more than makes up for this in other ways. Let’s take a look at a few reasons why you should buy BMO.
1. Exposure to foreign markets
Historically, BMO has been viewed less as an international bank than other banks, but since the Financial Crisis of 2008, BMO has worked heavily on no less than eight separate acquisitions to bolster an international footprint in U.S., European, and Asian markets. Some of the acquisitions that the company has made include Milwaukee-based M&I bank in 2010 and London-based F&C Asset Management PLC in 2014.
An additional acquisition was recently announced: GE’s Transportation Finance business. This acquisition could spell significant gains for the bank from the commercial banking sector. GE’s Transportation Finance business represents the largest financier to the commercial truck and trailer segment in North America, and there are significant revenues, both real and potential, that could make this acquisition very lucrative in the years to come—loans in leases alone account for nearly $13 billion.
2. Dividend performance and history
As an investor, the one thing that really excites me about BMO is the dividend. The company has never missed a dividend payment, and has been paying them long before any federal election, war, or recession. The company started paying dividends in 1829 and hasn’t stopped since then.
Putting aside the history of payments, BMO has a record of paying out very handsome dividends that relatively few banks could attempt to match. At $0.82 quarterly per share, BMO pays out a yield of nearly 4.4% annually.
3. Quarterly performance and prospects
During the most recent quarter, the company reported net income over $1.2 billion, which was an increase of 6%. The commercial and personal banking business posted $792 million in earnings, representing an increase year over year of 13%. The wealth management sector also reported increases to adjusted net income of 10%.
BMO is currently priced at $74.41, mid-way to the 52-week high of $84.39. Over the course of the last month, the stock is up over 7%, and extending this out year-to-date, BMO is down by over 9%—much like the market on the whole. Longer term, the stock is up by 25% when considering the past five years.
In my opinion, BMO represents a great opportunity for investors looking to diversify their portfolio with a company in the financial sector. The company has solid growth, great financials, and has significant growth prospects that should ensure healthy dividends for investors for years to come.