The S&P/TSX Composite Index was up 89 points in early afternoon trading on Thursday, August 10. Some of the top-performing sectors included telecom, information technology, and financials. Today, I want to target Bank of Montreal (TSX: BMO) and explore three reasons investors should look to scoop up one of the top Canadian bank stocks. Let’s jump in.
How has this bank stock performed over the past year?
Shares of BMO have dipped marginally month over month as of early afternoon trading on August 10. Meanwhile, the bank stock has dropped 4.7% so far in 2023. Investors can see more of its recent performance with the interactive price chart below.
BMO delivered solid earnings in its most recent quarter
Investors can expect to see BMO’s third batch of fiscal 2023 results later this month. In the second quarter (Q2) of fiscal 2023, the bank reported adjusted net income of $2.21 billion — up from $2.18 billion in the previous year. Meanwhile, adjusted earnings per share (EPS) fell to $2.93 compared to $3.23 in Q2 2022. Earnings were negatively impacted by an increase in provisions set aside for credit losses of $1.02 billion — up from $50 million in the prior year.
In the first half of this fiscal year, the bank reported adjusted net income of $4.48 billion — down from $4.77 billion for the first half of fiscal 2022. BMO was bolstered by its acquisition of Bank of the West. Moreover, it has benefited in part from higher interest rates that have improved profit margins in its retail banking space. While higher rates may put a cap on credit growth, BMO should continue to see high net interest income in this more balanced rate climate.
Like TD Bank, BMO offers significant exposure to the United States banking space. In Q2, its U.S. Personal and Commercial Banking segment posted adjusted net income of $866 million — up 47% compared to the prior year. The segment was bolstered by a stronger U.S. dollar as well as higher net interest income.
Meanwhile, Canadian P&C adjusted net income decreased 8% year over year to $864 million. Moreover, its Wealth Management segment declined 10% to $285 million. Adjusted net income in its Capital Markets segment also dropped 14% to $388 million.
This bank stock still boasts a rock-solid dividend payout
BMO currently offers a quarterly dividend of $1.47 per share. That represents a very solid 4.9% yield. Moreover, BMO has delivered 11 consecutive years of dividend growth. Investors should feel good about owning this Dividend Aristocrat for the long term. BMO boasts an immaculate balance sheet at the time of this writing. Investors can rely on dividend income from this stock for the long term.
BMO stock looks undervalued in the first half of August 2023
Shares of this bank stock currently possess a price-to-earnings ratio of 11. That puts BMO in attractive value territory at the time of this writing. Canadian investors looking for a balanced blue-chip stock with great value should look to snatch up this top bank stock today.
