The holiday season is often a time of excitement and gift-giving. Yet this year, many Canadians are taking a more cautious approach. According to a recent survey by Bank of Montreal (TSX:BMO), a significant 79% of Canadians plan to cut back on their holiday spending. With rising concerns about the cost of living and financial stability, it’s not surprising that people are looking to tighten their belts.
In fact, on average, Canadians are still expected to spend about $1,991 during the holidays. Yet many are choosing to prioritize essential expenses and reduce the number of gifts they buy. Today, let’s look at BMO stock and whether the company’s stock could be a way to get that money back.
Cutting back
Financial anxiety is a real concern for over half of the population, with 54% of Canadians admitting that thinking about holiday spending makes them anxious. This anxiety is heightened by the fact that 49% acknowledge they tend to overspend during the holidays.
One key finding from the BMO survey is that 30% of respondents are unsure whether they will be able to afford every item on their shopping list. This uncertainty reflects the broader economic challenges Canadians are currently facing, including rising costs and stagnant wages.
In fact, 55% of people plan on using credit cards to cover their holiday expenses, and it could take up to three months to pay off those bills. Unfortunately, 21% of Canadians are not confident they’ll be able to pay off these bills in a timely manner, leading to even more financial pressure.
Beyond the holidays
Cutting back isn’t just a holiday theme, though. The survey highlights that 44% of people have already reduced their spending on birthdays and anniversaries throughout the year. For many, this reflects an ongoing trend of budgeting and rethinking how to manage financial priorities in an environment of increasing costs. Canadians seem to be adjusting their expectations and making trade-offs in order to participate in the holiday season without overextending themselves financially.
While the financial anxiety is certainly real, it’s not all doom and gloom. Many Canadians are adapting by creating personalized financial plans and working with banking experts to manage their budgets better. In a time when financial stress is high, creating a realistic budget and investing can be a way to bring back some holiday cheer.
BMO stock is a solid option
Turning to BMO stock, is it worth considering as a buy for its attractive 4.8% dividend yield? BMO has long been one of Canada’s top banks, and its stock offers solid income potential, particularly for dividend investors. The most recent earnings report for the third quarter (Q3) of 2024 shows a revenue of $31.41 billion but a year-over-year decline of 3.6% in quarterly revenue growth. Despite this, earnings per share (EPS) increased by 19.3%, thus highlighting resilience amid challenging economic conditions.
BMO stock’s dividend yield of 4.8% is certainly appealing, especially for investors seeking stable income. Historically, the bank has maintained a robust dividend policy, with a payout ratio of around 69.5%, suggesting that dividends are sustainable. The stock is currently trading at a price-to-earnings (P/E) ratio of 14.88, which is in line with industry standards. Plus, the forward P/E ratio is even lower at 11.74, suggesting potential growth.
Looking ahead, BMO’s future outlook remains positive, though not without challenges. The Canadian banking sector is currently navigating economic headwinds, including inflationary pressures and interest rate cuts by the Bank of Canada. However, BMO stock’s strong balance sheet of $401 billion in cash reserves and relatively low debt load position it well to weather these difficulties and continue providing value to shareholders.
Bottom line
Canadians are tightening their belts this holiday season, reflecting broader concerns about the economy and their personal financial situations. However, for those seeking to invest, BMO stock offers a solid 4.8% dividend yield and remains a compelling option. Its strong historical performance, combined with a positive earnings outlook, suggests that BMO stock is well-positioned to deliver consistent returns for income-focused investors.
