Investors are constantly seeking ways to maximize their returns while minimizing risk. A strategy that could be interesting then is pairing a stock with strong growth potential with a reliable dividend stock. This combination can provide a well-rounded approach to building wealth.
One stock that has recently exemplified growth potential is Shopify (TSX:SHOP). In this article, we will explore how coupling Shopify stock with a dependable dividend stock like Bank of Montreal (TSX:BMO) can create a robust investment strategy.
The growth of Shopify stock
Shopify stock, a rapidly evolving e-commerce platform, has been making headlines for years now. Over the past year, Shopify stock shares have surged by a remarkable 108%, showcasing its remarkable growth. Shopify’s attractive 15.2% debt-to-equity ratio and its 9.4 times book value also make it a compelling choice for investors looking for high-growth opportunities.
One of Shopify’s recent growth initiatives, Shopify Editions, has further solidified its position as a growth stock. Released on July 26, this product and innovation showcase introduced over 100 updates for its platform. These updates include Shopify Magic, an artificial intelligence (AI)-enabled suite of features that simplify business management for merchants. The Sidekick, powered by Shopify Magic, is an AI-enabled commerce assistant that enhances productivity and decision-making for business owners. Other additions like Shopify Collective, Shopify Marketplace Connect, and Shopify Credit offer diverse opportunities for growth and profitability.
When assessing Shopify’s financial performance for the second quarter, the numbers speak volumes. Gross merchandise volume (GMV) increased by 17% to US$55.0 billion, representing US$8.2 billion growth over the second quarter of the previous year. Total revenue soared by 31% to US$1.7 billion compared to the prior year, underlining its sustained growth. Merchant Solutions revenue, which grew by 35% to US$1.3 billion, primarily reflects the increase in GMV and the penetration of Shopify Payments. Additionally, the gross payments volume (GPV) grew to US$31.7 billion, accounting for 58% of GMV processed in the quarter. So, it’s clear where this growth is coming from.
The dividend of BMO stock
However, investors looking for a more balanced approach that includes dividend income can turn to stocks like BMO stock. While BMO stock might not offer the same level of high-octane growth as Shopify, it presents other valuable advantages. BMO stock trades at a modest 10.98 times earnings, indicating potential value for the price-conscious investor. Moreover, it offers an attractive 5.31% dividend yield, making it a reliable source of passive income.
Despite a slight decrease of 4% in the last year, BMO remains a steadfast and profitable investment. In their recent financial results, BMO recorded net income of $1,454 million, or $1.97 per share, on a reported basis and $2,037 million, or $2.78 per share, on an adjusted basis. This stability and strong performance demonstrate the focus on dynamic positioning for long-term growth and profitability.
What makes BMO stock even more appealing for dividend investors is its consistent commitment to shareholder returns. Concurrent with the release of their financial results, BMO announced a fourth-quarter 2023 dividend of $1.47 per common share. This dividend remained unchanged from the prior quarter but marked an increase of $0.08 or 6% from the prior year. This shows BMO stock’s dedication to rewarding its shareholders through dividend payments.
Bottom line
Coupling a high-growth stock like Shopify stock with a reliable dividend stock like BMO stock can create a powerful investment strategy. While Shopify offers impressive growth potential and a strong financial track record, BMO provides consistent dividend income and stability. By diversifying your investment portfolio with both types of stocks, you can benefit from the best of both worlds. You’ll achieve the growth potential of a promising stock and the security of a steady income stream. Balancing these two stock types in your investment strategy can help you achieve a more well-rounded and potentially lucrative financial future.
