Finding the right investment to add to your portfolio can make the difference between retiring comfortably and working well into your golden years. Fortunately, the market gives us plenty of options to choose from, including this Canadian bank stock.
This is the stock you need to buy
Canada’s big banks are some of the best long-term investments on the market. This is because they offer a combination of strong results coupled with unique growth opportunities. And the bank to consider buying right now is Bank of Montreal (TSX:BMO).
BMO is neither the largest nor most renowned of Canada’s big banks, but it is the oldest lender. As a result, BMO has been paying out juicy dividends to investors for nearly two centuries (more on that later).
BMO also offers investors a unique advantage over its big bank peers that comes in the form of a lucrative growth opportunity. The combination of that income potential and future growth makes BMO a must-have Canadian bank stock for any investor.
BMO holds massive long-term growth potential
Earlier this year, BMO completed the acquisition of California-based Bank of the West. The US$13.8 billion unlocks a host of new state markets for BMO in the West and Midwestern parts of the U.S.
In total, BMO is adding over 500 branches to its growing U.S. network, which will now include a presence in 32 states. With those new branches, BMO gains 1.8 million customers along with the billions in loans and deposits they represent.
The deal has propelled BMO to be one of the larger lenders in the U.S. market, and the eighth largest in North America by assets.
Let’s talk earnings and opportunity
Earlier this week, BMO announced results for the second quarter. During that most recent quarter, BMO earned $1,059 million, or $1.30 per share.
Overall, the results were reflective of a period of increasing uncertainty. BMO bumped up its provision for credit losses to $1,023 million in the most recent quarter, which included a sizable chunk from the Bank of the West acquisition. By way of comparison, in the same period last year, BMO set aside just $50 million.
The acquisition, along with a stronger U.S. dollar helped propel BMO’s U.S. segment to report income of $789 million in the quarter. This represents a $201 million, or 34%, bump over the prior year. The Bank of the West portion comprised $107 million of that amount.
Turning to the Canadian market, BMO reported $861 million in the most recent quarter, reflecting an 8%, or $79 million, drop over the same period last year. Increased expense costs and higher credit loss provisions were attributed to that drop.
Fueled by those results, BMO’s stock has dipped over 3% during the past week, and the stock has now dipped approximately 7% year to date.
To put it another way, BMO’s stock now trades at a unique discount that should appeal to long-term investors. Canada’s big banks have historically fared much better than their U.S.-based peers during times of financial uncertainty.
You can earn some juicy income, too
One of the main reasons why investors continue to flock to BMO is its juicy dividend. And BMO has been paying out that dividend for nearly two centuries without fail — longer than any of its peers.
Even better, the bank also has an established cadence of providing annual or better increases to that dividend going back years (with the one exception being during the pandemic).
Today, that dividend yield works out to a tasty 5.15%, handily making BMO a must-have Canadian bank stock for any well-diversified portfolio.
This Canadian bank stock is the complete package
No investment is without risk, and that even includes BMO. Fortunately, in the case of BMO, the bank offers growth and income-earning potential that is hard to pass on.
In my opinion, BMO is a great Canadian bank stock that should be a core holding in a larger, well-diversified portfolio.
Buy it, hold it, and watch if grow.
