Bank of Montreal (TSX:BMO) stock is certainly one of the top to consider these days. The dividend stock has a yield of 5.02% as of writing, which, of course, is great! That dividend remains safe and stable and should continue to climb in the years to come.
But here’s the thing. While that’s all great, the dividend isn’t why I’m considering the dividend stock today.
History on history
BMO stock is, first and foremost, a safe investment. The company doesn’t just have a long history but the longest history among the Big Six Banks. The bank was founded in 1817, making it through several recessions and economic downturns.
More recently, it’s also had a history of creating provisions for loan losses during these downturns. This has been important, as a financial crisis can cause Canadians to default on loan payments. In Canada, we’re lucky, as there is an oligopoly of banks in the country. So, while American banks may have a hard time getting back to normal, BMO stock and others tend to rebound quickly.
We’ve seen this time and again with BMO stock, thanks to its continued diversification of assets and provisions for these losses. However, while safety is important, it’s not why I’m buying this stock.
Look to the future
BMO stock is the stock I would consider not for a dividend, not even for its historic growth, but for its future growth. This comes from the bank buying Bank of the West during back in February 2023, though announced earlier. And honestly, it was just in time.
The US$16.3 billion deal marked the largest purchase of an American bank by a Canadian bank. It has helped the company expand beyond the stronghold it enjoys in the Midwest, spreading across the western United States and California. With more than 500 branches in 24 states, BMO stock now has an active presence in 32 states.
What’s more, after the purchase, the United States government stated there would be no more large purchases of American banks by foreign institutions. This meant other Canadian banks were unable to move forward with their expansion plans, as BMO stock was. Therefore, this is an opportunity that may not come again for any bank besides BMO stock for quite some time!
While the 5.02% dividend yield as of writing is certainly a great reason to pick up this dividend stock, it’s not the only great reason. BMO stock now has a huge opportunity that frankly isn’t available to the other Big Six banks. That could mean more returns, sure, but if you’re focused on the dividend, it’s great, too!
The dividend stock is well known for huge hikes in their dividend already. With more cash flowing in from this expansion, the company should be able to keep hiking the dividend for years to come. And again, that’s something the other banks won’t have access to for quite some time. So, BMO stock may be a great dividend stock, but there’s even more reason to buy it today.