December 13, 2018

Bank of Montreal (BMO)

 

The Bank of Montreal (BMO) or “bee-Mo” as it is commonly referred to by investors, is one of the large banks in Canada that form an oligopoly.  As a Canadian Bank, they are known for their diverse holdings, well-regulated lending practices, and large dividends.  The Bank of Montreal was founded in 1817 and now has over 11 million clients.  It is the smallest of the Big 5 (excluding National Bank).Divisions of the company include personal banking, commercial banking, wealth management, and capital markets. They are especially strong in wealth management since  the acquisition of Harris Bank (a US bank concentrated in servicing 1M$+ clients).   They have been able to use Harris’ knowledge and know-how to serve their Canadian millionaire clients the same way. Overall, it is well-rounded company with solid base, and a drive towards expansion.  The president and CEO of the personal and commercial banking branch recently stated that, “We are delivering strong results by differentiating out business from our competitors, and with a clear focus on one vision and one brand promise that both start with the customer.”

 

BMOThe major recent news for BMO has been its acquisition of M&I bank, which was based out of the North-Eastern USA.  The purchase was easily the largest deal in the history of the Bank of Montreal and adds considerably to the bank’s holdings in the USA.  Up until this year. BMO had been content to limit their USA exposure to their retail operation – Chicago-based Harris Bank – which they purchased in 1984 for 718-million.  The addition of M&I’s 374 branches gives Bank of Montreal about 700 US locations, focused primarily in Wisconsin, Minnesota, Missouri, Indiana, and Florida.  This means that the company’s USA outlets are starting to rival its presence in its own country (900 locations in Canada). BMO is not only expanding its retail banking operations internationally, but has its sites set on the international securities scene as well.

 

Since 2009 BMO Capital Markets has hired more than 130 new director-or-higher level employees in the USA.  This adds to the over 2,000 international employees that the branch now employs, including over 1,000 in the USA.  With many of the Canadian banks taking advantage of their strength relative to their stumbling USA competitors, BMO is definitely looking to gobble up market share in the banking vacuum that the 2008 downturns caused within the industry.  Perry Hoffmeister, the head of USA investment and corporate banking explains that, “With all the changes happening on Wall Street, we have been building our wholesale business by taking advantage of the dislocation to hire great bankers, salespeople and traders.”  It remains to be seen whether this large expansion into the USA will benefit the company in the long run, but it is definitely a bold attempt to keep up with its competitors such as Royal Bank of Canada (RY) and Toronto-Dominion Bank (TD).

 

With many experts claiming that BMO is the best current value of the Canadian banks, the stock is trading near his 52-week high of $64.  Its Price-to-Earnings ratio is a respectable 12.30 and it offers the substantial dividend of 4.61%. Our only concerns is that BMO has always been the bank with the highest dividend payout ratio. Therefore, if you are looking for a high yield , a bit rock’n roll bank, BMO should be part of your watch list.  If you believe that the American economy will begin to pick up and you are investing for the long term, the Bank of Montreal (BMO) maybe the perfect way to cash in for a stable dividend player.

TSE BMO

 

BMO Dividend Metrics:

Ticker    Name                       Dividend Yield    Payout Ratio    DEBT_TO_MKT_CAP    Dividend Growth 5 years    Dividend Growth 1 years
BMO      Bank of Montreal    4.61%                          58.75%                          2                                     7.25%                                      0.00%

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  1. […] which included the Royal Bank of Canada, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Montreal, and the Bank of Nova Scotia.  These days the National Bank of Canada is usually added to the mix, […]

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