In the past 30 days, 15 analysts have increased their EPS estimates for this Canadian bank. The shares have a current dividend yield of 5.20%, paid quarterly.
Bank of Montreal (BMO, BMO.TO)
From Income Investor
The rates we’re seeing right now will probably be the new normal for the next several years, even if inflation moves higher. That means five-year rates in the 2% range at smaller institutions and 1% or less at most of the big banks.
Dividend-paying issues have tended to underperform in recent months, but high-quality companies have maintained their payouts and, in some cases, even raised them.
I suggest it is time to reconsider the traditional 60-40 stocks/bonds split and move a higher percentage of assets into low-risk, dividend-paying stocks. Let me be clear about the meaning of low risk: I’m suggesting securities that may (and probably will) fluctuate in market value in the coming years but will maintain or increase their dividends/distributions. As an income investor, that should be your main focus. Don’t fret if the price of a stock temporarily goes down. The time to worry is if a company you own cuts its dividend.
The pandemic is squeezing banks in two ways. They are having to raise loan loss provisions to protect against customer defaults, which is cutting into earnings. Plus, the low interest rate environment is squeezing profit margins. It’s going to take some time for them to recover and investors have responded by dumping shares and driving down share prices. However, the sell-off has been overdone, as Bank of America analyst Ebrahim Poonawala said last week in a research report. He raised his rating on two Canadian banks, including Bank of Montreal, which has been on our Recommended List since 2015. The shares pay a quarterly dividend of $1.06 ($4.24 per year).
Gordon Pape, Income Investor, buildingwealth.ca, 1-888-287-8229, October 15, 2020