As an investor, you know there’s no better way to make your money work for you than investing in dividend-paying stocks. Many investors look for high-yield dividend stocks as a source of monthly income. But investors who are looking into long-term safety and security will invest in high-yield stocks that they can hold forever to profit from dividend payouts.
Not all stocks have the potential to offer investors dividend payouts reliably for a long time, but that doesn’t such shares don’t exist. If you’re looking for such a stock, I’ll direct you to the Canadian banking industry. Canadian banks are among the longest dividend-paying companies in Canada, and there’s one particular stock I’d like to point out.
The Bank of Montreal (TSX:BMO)(NYSE:BMO) is a prime candidate, in my opinion. The bank is one of the Big Five in Canada’s banking industry, giving you plenty of reasons to consider it as a buy-and-hold-forever stock. Let’s take a better look at BMO and why the bank’s shares could be an essential part of your investment portfolio.
A challenging year for Canadian banks and BMO
If you look at the year-to-date performances of the Canadian banking industry, you’ll understand that 2019 is proving to be a challenging year. Canada’s banks generally perform well, and many of them have failed to deliver as well as anticipated.
Several factors, including the mountain of household debt and overheated housing market, have contributed to the problematic performances.
BMO is one of the worst-performing banks among Canada’s top banks, gaining a very modest 9% since the start of 2019. In the Q3 2019 financial earnings report, BMO had mixed results to show. The bank’s net income was relatively flat at $1.6 billion, rising barely 1%. The total revenue for the bank did rise by 15% to $6.7 billion.
The challenging operating environment, combined with mixed Q3 2019 results and housing market issues caused Bank of Montreal to suffer. Investors started selling the bank’s stocks, and BMO is now among the most shorted stocks on the TSX.
Argument to buy-and-hold
There’s a recession looming, flat revenue growth, and a mixed third-quarter result in 2019. Despite these factors, there are reasons to believe the Bank of Montreal stocks could be an excellent buy for investors.
The share price for BMO stocks at the time of writing is $96.12 at writing. With ten times forward earnings, and a modest 1.4 times book value, BMO stocks are still quite affordable.
Another reason to favour BMO is the fact that the bank is the first company on the TSX to start paying dividends. The biggest banks in Canada began paying investors dividends for more than a century. BMO is the company that started it all in 1829. Whether the market is cyclical, or the country is going through a recession, BMO pays dividends to investors consistently.
Investors who had a stake in the bank, and fell into disfavour with Bank of Montreal made a rash decision as far as this fool can see. My foolish takeaway is that this could be the ideal time to buy Bank of Montreal stocks. The dividend yield is a juicy 4%; while you wait for the stock’s price to appreciate, you can enjoy dividend income from the bank.
Bank of Montreal has paid investors dividends for 190 years and is still going strong. I wouldn’t recommend the stock for investors looking to turn a quick profit, however. If you’re looking for a stock that you can purchase and hold onto forever, BMO should be topping your list of considerations.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned.