Bank of Montreal Dividend Stock Analysis 2017

BMO

Bank of Montreal (BMO.TO)(BMO) is the fourth largest of the Canadian banks by market cap. The company provides a diversified array of financial services operating via four segments: Canadian P&C, US P&C, BMO Wealth Management, and BMO Capital Markets. BMO is one of the oldest corporations in Canadian history, founded in 1817 and is headquartered in Montreal, Canada.

A Closer Look

The company’s peers include Royal Bank of Canada (RY), Toronto-Dominion Bank (TD), Bank of Nova Scotia (BNS), and Canadian Imperial Bank of Commerce (CM).

The Canadian banks are regarded as some of the safest financial institutions in the world. The companies have a long track record of being conservative and focused on long-term stability and prosperity. Most of these institutions have existed and paid dividends for more than 150 years and make for great core positions in any investor’s portfolio.

Bank of Montreal takes pride in being the first and longest dividend paying corporation in Canadian history. The company was founded in 1817 and recently celebrated the 200th anniversary. BMO is also the first Canadian corporation to ever issue dividends in 1829, an unbroken chain ever since. It is also impressive to note that the company has only reduced its dividends once in 1942. More recently, the company has been expanding overseas and has a sizeable footprint in the US, Europe and Asian markets.

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Recent Buy – Baby R2R’s New Portfolio

At the beginning of January, I set the following goal for the financial well being of our baby daughter. I am happy to report that I have started putting this plan into motion.

> New portfolio for our daughter – In 2016, my wife and I welcomed our daughter. Time to set things in motion for the financial well being of our baby daughter.

  • We have opened up a new RESP (Registered Education Savings Plan) account, which allows us to save and invest for her post-secondary education. The plan allows us to get education grant money from the government and is tax-deferred on the income generated. We intend to start investing this money soon and will post an update on which stocks/ETFs we chose.
  • In addition to the RESP plan, we intend to start a DRIP plan to put away a small amount of money each month (starting off with $100/month for now) that will be her nest egg when she is an adult. Time is one of the most powerful weapons in an investor’s arsenal and starting off a DRIP plan allows us to let the investment compound over the course of 20-ish years. I’ll post an update soon on which stock I am picking for this plan.

The Education Plan

A quick background on the Registered Education Savings Plan (RESP). RESP is an account type available to Canadians to save, invest and grow funds for post-secondary education. While not only limited to kids, it is generally targeted to help parents save for their kids’ education. The best part of this plan is that the government matches the contributions via the Canada Education Savings Grant (CESG). The grant amount is 20% of contributions to a max of $500 per year. So, to maximize the benefits, we would contribute $2,500 per year into this account.

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Diversification of Canadian Banks – Take Two

Last week, I posted an article that took a deep dive on the geographical diversification of the Big Five Canadian banks – Royal Bank of Canada (RY), Toronto-Dominion Bank (TD), Bank of Nova Scotia (BNS), Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce (CM). The article can be found here.

In that article, I presented data for geographical revenue diversification of the banks – and presented 10-year trend charts.

Revenue provides only part of the story, and I decided to continue digging and pull the earnings numbers as well. Unfortunately, the earnings presented in the annual reports are broken down by segment and not geographical regions, so there is no apple-to-apple comparison to see which geography is earning the most. However, looking at the segment breakdown can also provide some insight on which direction a bank is headed.

For the sake of completeness, I am also including the charts for geographical revenue diversification in addition to the earnings-by-segment charts. Enjoy.

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Geographical Diversification Of Canadian Banks

The fiscal year for the Big Five Canadian banks ends in October. With the end of the year, and a delay of a few weeks, companies release their annual reports which give investors a clear picture of the overall operations with breakdown in revenue and earnings. This is vital information for long term investors and provides visibility into the operations.

Management may say one thing or another, but the numbers always speak for themselves — and confirms whether management is executing the path that is paved by the ideas generated in order to look for stability and growth. This article will take a look at the state of affairs of the Big Five Canadian banks and their geographical diversification. The five banks take the lion’s share of the Canadian financial markets and also have sizeable operations in U.S. and overseas markets. The data for each of the banks presented below has been extracted for each company’s respective annual reports for the year.

CdnBanks - Geographical Diversification 2015

In addition to the revenue diversification for the year 2015, this article takes a look at the trends of how the geographical diversification changed over a course of past ten years.

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Sector Overview – Canadian Banks

This article provides a sector overview of the Canadian banks. The Canadian banks are counted amongst the safest and most stable financial institutions of the world and have a proven track record of being conservative and focusing on long term growth and prosperity. It is no wonder that the banks routinely find themselves in portfolios of most long term focused investors and make for a great core position. The banks are also great for income focused investors as they paid a good starting dividend and also raise those dividends regularly. Now that Canada is facing a lot of headwinds in the economy, most bank stocks have been beaten down and provide a great opportunity to initiate/add to the position.

My previous articles in the Sector Overview garnered plenty of interest as you readers found it valuable. So, without further ado, here’s a sector overview for Canadian banks.

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