Spotlight Sunday: BMO

Wow, what a rebound. After unemployment numbers in Canada and the US released, showing employment that was well above what analysts projected, stocks soared on even greater optimism that the economy was going to return to form sooner than we thought. 

This sunday, we’ll be diving into a stock that has really benefited from the recent market rally, and we believe investors should buy now (before price shoots up too high) and hold for the long term. Today we will be looking into the Bank of Montreal, otherwise known as BMO.

BMO released their Q2 2020 report late last month, and the results weren’t the worst. They’ve increased their dividend dollar per share, from $4.06 last year to $4.24. Net revenue from Q1 until now have decreased by $500 million, and net income along with earnings per share have been cut by more than half. Even with the losses, the bank still performed better than the forecast predictions. 

The light at the end of the tunnel in all this is that the Bank of Canada announced that they’d be keeping interest rates steady at 0.25%, indicating that they believed the worst of the pandemic has passed. 

With the employment rate increasing and demand coming back into the economy, it’s also looking like the default rate on mortgages and loans should decrease, as lenders gain the ability to pay back their debts, allowing banks to take back some of that lost revenue from the pandemic. 

With recent news looking good for the banks, BMO is one stock that investors should jump on before it’s too late. With a solid dividend yield of 5.72% and trading at around 75% of it’s value pre-pandemic, this is an equity that’s meant to be bought and held onto. With Canada having only a few real “central” banks, it’s hard to believe that even one of them would fail, even with the current economic climate. Now that things are picking back up, expect the banking sector to slowly make it’s climb back to where it used to be, so long as demand and employment goes up with it. 

As of Friday market close, BMO is sitting at $76.07, an increase of 2.59% on the day.

Any thoughts? Feel free to comment below

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