Monday, January 13, 2014

Bank of Montreal 2

On my other blog I am today writing about my stock choices for my TFSA for 2014...continue...

I own this stock of Bank of Montreal (TSX-BMO, NYSE-BMO). When I bought this stock in 1983, I thought it was the best bank stock to buy at that time. I have only been tracking this stock on Quicken since 1987 and for this stock I have earned a return of 15.91% per year with 11.57% from Capital gain and 4.34% from dividends.

Over the past year the insider trading report shows $20.7M of insider selling and $20.0M of net insider selling. There is some insider buying of $0.7M. The thing with banks is that there are a lot of officers with options. For 2012 SO worth $146.5M increased the shares by 0.32% or by just over 2M shares.

The 5 year low median and high median Price/Earnings ratios are 9.12, 11.34 and 12.10. The current P/E Ratio is 11.44. This is close to the 5 year median of 11.34, so it probably says that the stock price is reasonable. The P/E Ratio of 11.34 is based on a stock price of $71.75 and 2014 earnings of $6.27.

I get a Graham price of $78.51. The 10 year low, median and high median Price/Graham price Ratios are 0.83, 0.96 and 1.18. The current P/GP Ratio is 0.91 and this stock price test says that the stock price is reasonable.

The 10 year median Price/Book Value per Share Ratio is 1.72 and the current P/B Ratio is 1.64 a value some 95% of the 10 year median P/B Ratio. This stock price says that the stock price is reasonable.

The current dividend yield is 4.24% and the 5 year median dividend yield is 4.85%. A good price is when the current dividend yield is higher than the 5 year dividend yield. However, it is only 13% lower, so the stock price is probably reasonable.

If you compare the current dividend yield of 4.24% to the historical average dividend yield of 4.19%, then the stock price becomes cheap to reasonable.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold, Underperform and Sell recommendation. The consensus recommendation would be a Hold. The 12 month stock price consensus is $72.80. This implies a total return of 5.7% with 4.24% from dividends and 1.46% from capital gains.

The site of North Fork Vue talks about recent ratings for this stock. The site rates BMO as a hold but does not specify why. However, David Pett at Investing at the Financial Post rates this bank, was well as TD (TSX-TD) and Scotiabank (TSX-BNS) as best buys for 2014.

The Canadian banks are no longer the bargain that they have been. The price is probably reasonable. It is interesting that analysts are all over the place as far as recommendations go. They are probably rate that there may be little profit in 2014 for this bank. See my spreadsheet at bmo.htm.

This is the second of two parts. The first part was posted on Friday, January 10, 2014 and is available here.

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 BMO.

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 or StockTwits.

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