Kids are so stressful. Don’t get me wrong, I love my kids. More than anything! But that’s the point. It’s so stressful to constantly be worrying. And the usual worries? It’s about their future. That’s why when it comes to investing, I don’t want to stress. I want stocks that can compound over the years so it’s simply one thing in my life I do not have to worry about.
Canadian banks offer the perfect option. These are some of the biggest institutions not just in Canada, but around the world! Yet, if I’m looking at one to pass onto my kids, it has to be Bank of Montreal (TSX: BMO).
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About BMO
First, let’s get into why BMO remains such a great stock for investors. BMO is Canada’s oldest bank, founded back in 1817. Since then, it has paid uninterrupted dividends since 1829! That’s two centuries of record income generation, through wars, depression, and shifting rates. Heck, it’s older than the founding of Canada!
And that strength doesn’t look as though it’s going anywhere. During its most recent quarter, BMO delivered adjusted earnings per share (EPS) growth of 22% year over year, with net income above $2.3 billion. Furthermore, its CET1 ratio hit 13.5%, showing strong capital and room to absorb credit cycle bumps while still rewarding its shareholders.
More to come
But just because the history is there doesn’t mean there’s no growth for the future. BMO stock doesn’t lean heavily on its peers as others do in Canada. Instead, it’s balanced between domestic and United States operations. The U.S. personal and commercial segment delivered 51% year-over-year profit during the last quarter. Plus, wealth and insurance grew sharply during that time as well.
More is certainly on the way, with a planned acquisition of Burgundy Asset Management that will expand its footprint into high net worth and ultra high net worth wealth management. This space generates more fee income, and is less sensitive to rates than lending margins. This balance between lending, wealth, insurance, and capital markets gives BMO multiple ways to grow earnings cycle after cycle.
Earning income
The other positive? BMO holds a dividend yield at 3.7%, with a payout ratio at 56% of earnings as of writing. That’s well within Canadian bank norms, and leaves room for even further dividend increases. The dividend has been raised regularly and is backed by consistent profitability plus strong capital. Right now, a $7,000 investment could bring in an annual income of $254!
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| BMO | $179.12 | 39 | $6.52 | $254 | Quarterly | $6,985 |
Plus, management has been boosting share buybacks, with a new authorization of up to 30 million shares! The combination of cash dividends and buybacks enhances its long-term compounding, especially when those dividends are reinvested inside a portfolio.
Bottom line
I know, it can be stressful having kids. Believe me. But if you’re looking for safe income that can be passed onto your children, then BMO belongs on that list. It simply checks the boxes for a “forever” stock. One that offers growth and dividends not just over years, even decades, but centuries. So for growth and income across generations, BMO stock belongs in practically every portfolio.
