Written by Amy Legate-Wolfe at The Motley Fool Canada
Canadian banks are going through quite a difficult time these days. But honestly, don’t feel too bad for them. Canadian banks are doing just fine, as they all have provisions for loan losses during times of trouble. It’s why our banks today have made it through recessions and downturns again and again. But perhaps none has done it better than Bank of Montreal (TSX:BMO).
Why? Because BMO stock has been around now for over 200 years! That’s an insane amount of recessions, depressions and downturns to go through. Yet it always comes out the other side. So, let’s look at where this stock could be in just the next five years.
While BMO stock is known for its history, perhaps it should be known more for its future — that is, its future growth. BMO stock in the last few years finalized the purchase of Bank of the West. This major purchase was huge for the company, as it gave it even more exposure to the United States.
But there’s even better news for BMO stockholders. Since the purchase, the U.S. has put a stop to any major foreign purchases of large companies. That includes Canada, and it’s why Canadian banks have been turned down from making major investments in the country.
Now, BMO stock has a huge advantage over the other Canadian banks and could grow even further now that it has a major foothold in the West.
Yet back in Canada, BMO stock has latched on to the growing business of exchange-traded funds (ETF). It now has hundreds of ETFs for Canadians to choose from, all dependent on their risk profile or even just their interests!
This focus on ETFs has become quite lucrative for the company as well. With so many options, Canadians have been going to BMO stock first to find ETFs. This provides the company with more and more management fees to put in their pockets.
Add in wealth and commercial management, and even during this downturn, BMO stock looks just fine.
Less into housing
Another benefit that BMO stock has ahead of its peers is that the bank simply isn’t as into Canadian housing as the others are. This allows the stock to see fewer losses from the Canadian housing market, as well as from the lack of mortgage growth.
This will also mean that BMO stock will be able to come out of the current economic downturn, likely far sooner than its peers. While all the banks are certainly set to climb back to 52-week highs eventually, it would be nice knowing your BMO stock would do so far sooner.
And with large dividend increases in the past, this would also likely set up investors for another dividend bump. So, with shares trading at 10.47 times earnings and a dividend yield of 5.61%, it looks like a great time to pick up BMO stock as we continue our way through this volatile market — especially given its track record and future outlook.
Before you consider Bank of Montreal, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in October 2023... and Bank of Montreal wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 25 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks * Returns as of 10/10/23