Bank Of Montreal: Go North Of The Border For This 5% Yielder

| About: Bank of (BMO)

I am still reticent to put much money in American banks due to increasing regulation, a backlog of litigation, a moribund housing market and small dividends. I do have some minor positions in JP Morgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC) and Huntington Bancshares (NASDAQ:HBAN). However to find banks without the problems of their American counterparts and with high dividend yields I have no problem looking for bargains north of the border. One bank I believe is a solid value is Bank of Montreal (NYSE:BMO).

7 Reasons BMO is a solid pick for income investors at $58 a share.:

  • It yields a robust 4.8% and has an A+ rated balance sheet. Given EPS growth projections, I believe dividend payments should be increasing significantly in the near future.
  • Earnings are showing solid growth. It made $5.29 a share in FY2011. Analysts project it will make $5.70 in FY2012 and $6.23 in FY2013.
  • Analysts see further upside to the stock in addition to its dividend yield. The three analysts that cover the stock have a median price target of $67 on BMO.
  • It is selling in the bottom half of its five year valuation range based on P/E, P/S, P/B and P/CF.
  • The stock has a forward PE of under 9.5 and a very reasonable five year projected PEG (1.25) for a high yielder.
  • The company has used the downturn to make prudent acquisitions in the United States like Marshall & Ilsley at bargain prices.
  • The stock looks like it has support just under current prices, is showing increasing technical strength and just crossed over its 100 day moving average (See Chart).

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.