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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).


(Click to enlarge)

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