Better Dividend Buy: BMO or CIBC Stock?

While both offer high dividends and immense value, does BMO or CIBC stock offer the better dividend buy?

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The Big Six Banks are all great investments at any time, really. They’ve been around for decades, and in some cases over 100 years. They’ve managed to come out the other end of each recession and regain their strength, which is why these dividend stocks are some of the best when it comes to passive income.

Yet amongst the Big Six, the two with the best dividend for your buck are Bank of Montreal (TSX:BMO) and Canadian Imperial Bank of Commerce (TSX:CM). If you’re only considering one, which is the better buy today?

Case for: CIBC stock

CIBC stock has long been a strong company that seems to only be getting stronger. Granted, recently that hasn’t been the case. The company fell drastically for several reasons. There was the decrease in loan growth, and that was coupled with the falling housing industry across the country.

Even so, CIBC stock has retained strength thanks to its invigoration of its customer service. It has been bringing in more and more clients, by having a far better understanding of their needs. And these needs translate into better recommendations, and thus better long-term growth towards their goals.

Yet with the market as it is, it could be a while before CIBC stock recovers completely. Shares are down a whopping 30% in the last year, trading at 11.8 times earnings as of writing. Therefore, even a stock split last year may not be enough to bring investors back for its 6.01% dividend yield.

Case for: BMO stock

Then there’s BMO stock, which has been on the market for over 200 years! You would think that means there isn’t much growth to be done, but you’d be wrong. Thanks to the acquisition of the Bank of the West in the United States, BMO stock has even more growth coming its way.

In fact, the company was able to focus on these acquisitions owing to its financially strong position. While others were hoarding cash, this company was expanding. And now it’s set up for long-term growth in the U.S., a country that traditionally recovers more quickly than Canada.

And where CIBC stock has exposure to the Canadian housing market, BMO stock does not. This could certainly protect it during a downturn. But the question is, what about after a downturn? It’s becoming harder for the company to find new opportunities after expanding so much, so long-term growth may in fact slow.

With that in mind, again the question is whether there is enough hope to outweigh potential low returns. Shares are quite valuable trading at 5.2 times earnings, and down 23% in the last year. So is that enough to bring in a 4.89% dividend yield?

Bottom line

You can’t go wrong with the Big Six Banks, and both of these are strong options. But today, I have to give it to BMO stock. The company has immediate growth potential driven by its expansion into the U.S. Further, it won’t fall as dramatically from this housing downturn. So if you’re looking for dividends that will continue coming in, along with low volatility growth, BMO stock is the one to choose today.

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 Amy Legate-Wolfe has positions in Canadian Imperial Bank Of Commerce. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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