Selecting the right investment mix can be a daunting task at times; investors must weigh in on stock performance, dividend payouts, growth, and a host of other factors.
Canada’s big banks are great investments that offer a history of favourable results, respectable dividend payouts, and, for the most part, growth prospects to look forward to over the long term.
Bank of Montreal (TSX: BMO)(NYSE: BMO) not only fits this demographic, but it sticks out as a more impressive option over the rest of the banks. Here’s a quick look why.
Bank of Montreal’s dividend
When it comes to dividends, Bank of Montreal not only provides one of the best dividends of all the banks, but it has also been paying a dividend longer than anyone else. The bank has impressively been paying a dividend to shareholders for over 150 years, which really brings new meaning to a long-term buy-and-forget investment.
Bank of Montreal currently pays a quarterly dividend of $0.86 per share, which–given the current stock price of just over $84–results in the stock having a respectable 4.09% yield. In terms of dividend increases, the bank has consistently hiked the dividend over the past few years, keeping the payout ratio at a respectable level.
Given Bank of Montreal’s largely positive results, the bank is likely set to continue raising the dividend over the long term.
Bank of Montreal’s diversified business
Unlike some of Bank of Montreal’s peers, the bank has truly diversified into other markets and other areas of the economy.
On the banking front, Bank of Montreal has shored up its U.S. presence in recent years with a number of acquisitions that have seen the bank’s footprint and revenues from that market grow.
In the most recent quarter, revenue from the U.S. market shot up an impressive 27% over the same quarter last year, coming in at $279 million.
Bank of Montreal also has a number of non-banking-related investments. Last year the company acquired the Transportation division from General Electric, which provides leases for the trucking industry. This is a potentially lucrative source of revenue for the company, particularly considering the market share the Transportation division commands.
Bank of Montreal’s results
One of the most telling reasons to invest in Bank of Montreal is its performance over the last few quarters.
In the most recent quarter the bank reported earnings of $1.73 per share–just shy of analysts’ expected return of $1.76 per share. During the same quarter last year, the bank earned $1.71 in earnings per share. Net income was also down for the quarter by 3%, closing at $973 million.
Despite those weak results, there are two factors to consider.
First, Bank of Montreal, like other banks, is shoring up on provisions for credit losses as a safety measure given the weakened economy in parts of the country. During the most recent quarter Bank of Montreal increased this provision to $201 million–up from $161 million in the previous quarter.
The second point worth noting is that while the quarter came in weak, the year-to-date figures are still very strong, and year-end guidance targets are still on track. By comparison, year-to-date net income is up by 2%, adjusted net income is up by 7% and earnings per share are up by 3%.
Bank of Montreal remains, in my opinion, a great option for investors seeking a long-term growth and income-generating option.
