Then and now – Bank of Montreal
This post is a continuation of my series Then and Now where I revisit some older blogposts and either rip them to shreds (because my thinking has changed) or I’ll confirm my position on some personal finance topics or specific investments.
You can check out my previous posts in this series here:
This post is an update on my investing history to date with Bank of Montreal.
Then
- I started writing about Bank of Montreal (BMO) in 2011 when I considered some Canadian dividend stock selections were somewhat easy.
- Many years ago, after noticing this big bank (along with others) make some serious money year-after-year, I decided to invest in this company.
- I believed bank stocks made a great home in registered accounts (like TFSAs, RRSPs) because you can reinvest dividends tax-free or tax-deferred.
- I also believed bank stocks are a wise, tax-efficient investment in taxable accounts because you can take advantage of the Canadian Dividend Tax Credit.
- I bought Bank of Montreal because it’s a core holding of most Canadian Exchange Traded Funds (ETFs) and big bank equity mutual funds.
- I bought BMO because I wanted to participate in the capital growth and dividend raises it has historically delivered shareholders – I believe similar growth could occur in the future. (Note: BMO has paid dividends 1829. Some stocks have paid dividends for generations).
Now
- At the time of this post, BMO is now trading close to a 52-week high, at about $100 per share.
- Since I started investing in this stock, dividends have increased substantially. (Dividends are now $0.93 per share thanks to a recent increase.) Here is table showing dividend increases since just 2012.
Image courtesy of BMO here.
- Our dividend income earned from this company is almost enough to cover our hydro bill – every year.
- I have no plans to sell this stock. I may add more shares in the future.
My decision to buy (and hold) BMO has been a great decision but there are no guarantees when it comes to dividend income or investing in general. Not all of my purchases have come up roses. Purchasing individual stocks has risks and indexing could prove to provide better long-term returns. For diversification purposes, this is why I own more companies than just BMO let alone just financials in my portfolio. You can check out some of my holdings here.
What’s your take on Bank of Montreal as an investment? Own it in your portfolio as an individual stock?
Yes, I love my Canadian banks, too. I hold BMO, TD and RY. Those three have significant US business that is important to to me.
I hear ya Charles. Unless these banks cut their dividend I’m owning them for good.
All the big six banks were performing quite well for the last few years. The dividends keep on increasing, the share prices continue to rise, interest rates is projecting to increase, what’s there not to like about the bank stocks?
Banks as a whole make up a large part of my portfolio and I am fine with it. I currently own BMO , BNS and RY and will continue to own them for the foreseeable future.
That’s the thing Leo…people love to hate banks and telcos – until they are a shareholder and most of us are, directly or indirectly via various fund products. We WANT companies like BMO to be very successful. I will continue to own all 7 our of country’s biggest banks for the foreseeable future.
Hi Mark,
I’ve been in the “DIY” mode of Investing (“UR$URWay”) for over 30 years, and helping others do the same. At this juncture in the markets I would tend to lean on the side of caution regarding most equities. I use ‘fundamentals’ and ‘technical’ signals to guide my decisions. Fundamentally, “Banks” and most other stocks are trading at historical highs. The amount of free “Liquidity” pumped into the financial markets since the 2009 correction has been, like giving free drugs to an addict and expecting sobriety! Comparing equity values on a “Linear Regression” line indicates values not seen since 2006/7, just prior to the 2009 cash! It’s time to be “fleet of foot”, and ready to execute some exit strategies. As my dad once said to me…”you won’t go broke making a profit. Your probability of success rests in 20-30% profit turns. In baseball terms… singles and doubles are far more valuable than the odd Home Run.
UR$URway
Paul
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Paul, you can make money in falling markets as well. But – I disagree with you. The TSX and BANKS will have a nice climb in 2018.
I hope so Mike!! Higher interest rates are great for life insurance companies and banks.
I see the caution Paul given the frothy state of the markets – but who really knows what tomorrow could bring?
I’ve never really hit a big home run with investing. I consider my approach to investing akin to your hitting multiple singles over and over again.
Good luck with your portfolio in 2018 – thanks for reading.
When I fired my investment advisor back in 2010 and decided to be my own advisor by joining BMO discount brokerage, BMO shares were my 1st purchase! I remember sweating when I hit “buy” online for $1000 and mixed emotions of fear and excitement. Seems like along time ago when I see how far I’ve come with my investments (and reading blogs like yours) 🙂
I hear ya Bonnie. I recall making a major investment (for us at least) into BMO around 2009. I believe I started writing about BMO in 2009, in a few posts. I’ve held those shares ever since.
Those days do seem like a long time ago….
I appreciate the kind words about my site. It’s fun to run and I’ve met some nice people in-person and online in the process.
Cheers,
Mark
Hard to argue the strategy of holding A few of the Canadian bank stocks as part of a long term buy and hold portfolio. I’ve held RY, BMO and TD along with a diversified mix of about 12 other Canadian stocks as core holdings since long before i discovered ETFs. All set up on DRIP and just let the new shares accumulate. Also, being a very patient value investor I usually add more in cases where markets have significant setbacks as long as their fundamentals remain intact. This strategy has worked relatively well and as a consequence my ACB for RY is only $23 and for BMO $46 (my last major purchase of RY was near the bottom of the 2008 low).
To supplement my Canadian holdings i added a small position in XIC to ensure some coverage of the rest of the Canadian market and then used a few ETFs to diversify into US, EAFE and EM along with short term bonds. Current split is 35% Cdn, 40% US, 15% EAFE, 5% EM and 5% bonds/preferred. I realize that this seems a very aggressive portfolio with only 5% fixed income but the last several years have been very bullish, however, I’ve recently adjusted tactics to start trimming some holdings and holding more cash. My goal is to end up at around 20% cash (15% actual + 5% bonds) by early next year.
Keep up the good work Mark.
Thanks WreckingBall.
Yes, hard to argue with bank stock returns over the last 8+ years…but you never know with investing so I keep about 30-40% of my portfolio in financials for that reason.
I’ve also held RY and TD for many years and I intend to unless a dividend cut occurs. I own about 20 more CDN stocks. Like you, most are DRIPping each quarter to grow the cash machine. I recall you’ve seen this chart on my site:
https://www.myownadvisor.ca/dividends/
New contributions/buys help but it’s starting to be the power of reinvested dividends in my TFSA that are increasing this stream year-after-year.
Those are some crazy ACBs. Well done. Capital gains might hurt eventually but that’s a great tax problem to have I believe 🙂
For my U.S., I own VYM. I’m not yet convinced I need lots of EAFE or EM.
Your fixed income is low for some investors tastes, yes, but I have nothing planned other than a cash wedge eventually.
https://www.myownadvisor.ca/cash-wedge-opening-investment-taps/
Sounds like you are doing very well yourself. Kudos.
Happily, capital gains won’t be a problem for RY and Bmo at those ACB’s as they are in the rrsp. ACB for similar holdings in taxable portfolio are somewhat higher.
But it’s still gratifying computing my “effective dividend rate” on the low ACB (ie 3.64/23= 15.8% for RY)
Hard to fault your own dividend strategy since, at least in Canada, the best, and longest uninterrupted dividend payers often lead the way back faster after a market correction. Einstein called compounding the 8th wonder of the world, he who understands it, earns it, he who doesn’t, pays it.
Ah, nice 🙂 re: RRSP.
“Einstein called compounding the 8th wonder of the world, he who understands it, earns it, he who doesn’t, pays it.” Yupper.
I had to laugh as BMO is the only bank stock I don’t directly own. No particular reason, I just never bought any. Thought of buying some but figured I already had all the rest so I just never got around to it.
BMO has delivered some great returns over the years. Not that others haven’t done very well for investors as well.
MDA –
Pretty cool look back you are doing, keep doing it! I’ve been interested in each one you’ve posted. As for BMO – it’s been a great stock over that time frame, for sure! I agree with your conclusion of still owning/holding them.
-Lanny
Thanks for reading Lanny.