Friday, December 16, 2011

Bank of Montreal 2

I own this stock (TSX-BMO). This was the first bank stock that I bought. I bought it back in 1983. I have only been tracking it on Quicken since 1987. Since I have been tracking it, I have made a total return of 16% per year. Of this return, my dividends payments were 7.5% per year.

When I look at insider trading, I find no insider buying and lots of lots of insider selling. The CFO has sold $19M and then there is $21M by officers, for a grand total of $40M of insider selling. It would seem that insiders are not keeping their stock options. Some 504 institutions own around 57% of the shares of BMO. There has been buying and selling by institutions over the past 3 months. They have increased their shares in this company by 8.4% over the past 3 months.

I get 5 year median low Price/Earnings Ratio of 10.52 and 5 year median high P/E Ratio of 16.87. I get a current P/E Ratio of 10 on a stock price of $56.66. By this measure the current stock price is low. It looks even better over a longer period as the 10 year low P/E Ratio is 11.06.

I get a current Graham Price of $70.89. The current stock price of $56.66 is 25% lower. The 10 year low difference between the Graham Price and stock price is the stock price being 9.6% lower. By this measure the stock price is low.

I get a 10 year Price/Book Value Ratio of 1.75. The current P/B Ratio is 1.43, which is 73% low the than 10 year median P/B Ratio and shows a low current stock price. The last stock price tests is for Dividend yield. I get a current yield of 4.94% and a 5 year median dividend yield of 4.85%. This shows a low stock price. Also, the 10 year median high yield is 4.23%, even lower than the 5 year median.

So, by all my tests the current stock price is low. Of course, you have to be careful when stock prices are low. They can be low for a reason. When looking at analysts’ recommendations, I find them all over the place with recommendations of Strong Buy, Buy, Hold, Underperform and Sell. The consensus recommendation would be a hold.

Analysts feel that the dividend is safe. This is the only bank not to raise their dividend after the most recent crisis of 2008. One analyst expects this to change within 6 to 9 months. I do not think that anyone expects BMO to do well in the near term, but they do expect it to do better in the long term.

Well, we know what Desjardins thinks of BMO. See G&M article called Desjardins downgrades Bank of Montreal.

The blogger addicted2dividend has blogged about this stock recently at The Loonie Bin. This bank, along with Royal Bank is cutting jobs, but both are cutting less than 1% of workforce. See the Financial Post.

Analysts that feel it is a buy feel the dividend is safe and BMO is a buy for the long term. Analysts that say it is not a buy feel that it could go lower and there is too much risk in buying this stock, especially in the short term. Personally, I will not be selling my stock in this company. I feel that it will come back and provide reasonable future returns.

BMO is a bank. They offer personal and corporate banking and wealth management services in Canada and US, which includes looking after banking, financing, investing, credit card and insurance needs. They offer mortgages and mutual funds and they offer full service and on-line brokerage services. They are international bank having banking in Canada and US. They have clients, corporate, institutional and governmental, in UK, Europe, Asia and South America. Its web site is here Canada Bread. See my spreadsheet at bmo.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.


  1. Thanks for the mention, Susan. I bought BMO at $56 this week getting a 5% yield. I can never time the markets right and probably never will.

    Oh well, I'll be able to drip new shares each quarter and win over the long run. Have a good weekend!

  2. There is one thing I was wrong about on the Bank of Montreal. That was what return my stock was earning after 29 years. On Thursday I had said that on my original stock price, I am making a 19.3% return on Dividends. I had forgotten the split in stock in 2001, so what I am making on my original stock price is a 39% return on dividends.

    I will mention this in my blog today.

    I had bought BMO over a period from 1983 to 1987 by DRIP process plus some extra cash.