Bank of Montreal (Symbol-BMO)

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yielder
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Bank of Montreal (Symbol-BMO)

Post by yielder »

Just took a position in BMO. Looks to be reasonably priced, not a bargain, at these levels. A 3.4% yield with 9% growth, a payout ratio of 40%, and a multiple of 11 on a forward basis.
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Post by scomac »

Just took a position in BMO.
Hmmm....interesting. I placed a limit order earlier today. Hasn't been triggered yet though.

And no folks, we didn't discuss this beforehand. :wink:

Now, if only ATB.SV.B would sell-off a bit more. :roll:
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Post by scomac »

Got a fill late in Tuesday's session. I must admit I was a little surprised considering the way in which the session ran up to midday. I figured my stinginess had gotten the better of me again. :lol:

Scott
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
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Post by scomac »

"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830
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Post by gyrfalcon »

# of times "beleaguered" used in story: one

# of times "troubled" used in story: three

# of times "restructuring" used in story: one

# of times "clean up" used in story: one

:roll:
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Post by Shakespeare »

With its dividend increase today, BMO now yields 4% on yesterdays close [but will likely open higher].

However, the raise in the dividend payout range (to 45-55% from 35-45%) also may reflect lower future growth prospects and therefore a higher yield.

Disclosure: I have a position in BMO.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
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yielder
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Post by yielder »

Shakespeare wrote:With its dividend increase today, BMO now yields 4% on yesterdays close [but will likely open higher].
Maybe - a short term pop; maybe not - lots of nervousness about rising rates & slowing growth with BMO down 11% from its 52 week high.

Disclosure: I currently have a position. This is not a recommendation to buy or sell. People should do their own research and make their own decisions, ie, I'm not responsible for what you do.
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Post by scomac »

Does the old rule of thumb no longer apply? That being, buy bank stocks when the yield exceeds 4%, sell when under 3%.

IMO, BMO has looked cheap for the past few weeks, even before today's announcement. Considering the move up off the open has been muted, I would consider this to be an excellent entry point. Shoot, the yield exceeds cash on a pre tax basis and we're not dealing with a no growth company.

Disclosure: I have a full weight position in BMO.

Disclaimer: Don't do what I do, I'm always too early to the party. Make up your own mind.
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
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Post by sydney2 »

It sure is great to get a raise today. We starting buying BMO at 36.99 and have continued buying it - I think we average in the 50 dollar range. Bought a few hundred share back a few weeks and started paying 64.50 and followed it downward, it brought the average overall cost up a bit, but I feel rewarded with the increase in the dividend. :lol:

I hope there is good news for BNS and TD and an increase in dividend. Rumor is that BNS will go to $1.52. I can buy another white wine at the Beer in the Hammer meeting.
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Post by Chuck »

I took a little nibble of BNS yesterday. I was thinking of taking a little nibble of BMO as well. I probably will tomorrow if the price doesn't get away from me.

After that I will sit tight until/if yields hit 5%. Then I'll take a big bite.
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Post by biker »

IMO opinion this is a good time to unload the banks.Take the profits now.
Live like you are dying but invest like you are immortal.

"Men do not quit playing because they grow old ; they grow old because they quit playing" Oliver Wendell Holmes
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Post by arnyk »

After that I will sit tight until/if yields hit 5%.
Another 20% drop in price before that happens (given that the dividend stays put for a bit).
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Post by adrian2 »

Chuck wrote:After that I will sit tight until/if yields hit 5%. Then I'll take a big bite.
When is the last time any of the Big Canadian Banks yielded 5%?
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Post by Springbok »

biker wrote:IMO opinion this is a good time to unload the banks.Take the profits now.
Kevin O'Leary agrees with you! Check tonight's Squeeze Play** - He say that teh banks can easily lose 20% of their market value, even when they are increasing dividends!

Still holding all the majors :(.


**Edited - BTW - This was quite a good Squeeze Play - Covered Interest rate hike, Ethanol, Harper's first 100 days.
Last edited by Springbok on 24 May 2006 22:30, edited 1 time in total.
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Post by Shakespeare »

He say that teh banks can easily lose 20% of their market value, even when they are increasing dividends!
And if they did, I would forsake my newly-found rediversification procedure and load them back up.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
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Post by adrian2 »

Springbok wrote:Kevin O'Leary agrees with you! Check tonights Market call - He say that teh banks can easily lose 20% of their market value, even when they are increasing dividends!
I like Kevin a lot, but sometimes he does not check his figures too closely. He recommended a handful of shippers, he quoted dividend yields which were too high; today's play of the day was France Telecom ADR (ticker FTE) which he claimed has over 8% yield (the real one is 5.82%) - he compared it very favourably with BCE which according to him has a less than 4% dividend yield (the real one is exactly 5%) and so on.

As to the Canadian banks, most of them are about 10% down from the peak. I would not be surprised to see some of them down another 10%, which will make for a 20% from the peak; another 20% down from here and I'll back up the truck.

A minor correction - Kevin was on Squeeze Play, not on Market Call.
Springbok wrote:Still holding all the majors :(.
I don't have all of them but my two biggest positions are still more than double their cost, plus all the "succulent dividends" (Kevin's quote).
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Post by scomac »

Springbok wrote: Kevin O'Leary agrees with you! Check tonight's Squeeze Play** - He say that teh banks can easily lose 20% of their market value, even when they are increasing dividends!

This from the man who proudly promoted the "broken trust index".....for a while. :roll:

I can't be bothered to replay the podcast to listen to Kevin's clap trap, but I would assume he gave reasons for his bold statement. If not, then I have very little use for anyone who makes bold predictions without backing it up with solid defensible rationale.

I currently have enough exposure to the Canadian banks having added some BNS in the past couple of sessions. That said, if Kevin's prediction were to come to pass, I, like others here, would margin my account and go way overweight in the banks.
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Post by yielder »

scomac wrote:That said, if Kevin's prediction were to come to pass, I, like others here, would margin my account and go way overweight in the banks.
The sound of value investor becoming irrationally exuberant. :lol: It's hard not to when you consider RY yielding 4%; TD, 3.6%; BNS, 4.3%; BMO, 5.1%; and CIBC, 4.3%.

If the banks dropped 20% from here, the first thing I'd do was an analysis of each to determine why the price is where it's at & assess the risks. The banks are pretty safe bets to buy on yield but the extent to which you buy blindly on yield increases your risk. Regardless, I wouldn't margin my account - a 20% decline isn't worth the risk.
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Post by Shakespeare »

I wouldn't margin.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
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Post by scomac »

Borrowing to invest isn't the problem in and of itself. I've done it plenty of times in the past, not to buy stocks, but in my own business. The bigger issue would be: How much margin? I already own three of the big 6, so borrowing 5%-10% of total portfolio value to add the other two and perhaps a bit more of the ones I own would hardly be considered an aggressive leveraging strategy, IMO.

Sure you could sell something else to finance the purchase, but what? It's likely that other interest sensitive investments will have been hit as well, so you end up selling one potentiallyundervalued investment to buy another on the premiss that there's more relative value in bank stocks. Who knows, maybe I'd be lucky enough to have made a big gain on defensive stocks like consumer staples or health care which I could parlay into an increased bank exposure, but maybe not. Every once in a while you have to be prepared to stick your neck out when the odds are stacked heavily in your favour.
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Post by yielder »

scomac wrote:Borrowing to invest isn't the problem in and of itself.
Depends on where you are in your investment life cycle. During the accumulation years where you have new cash flow, possibly. During the consumption years where the cash flow is negative, it's a highly risky strategy. If it backfires, how do you recover when you don't have a paycheck to help you rebuild?
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Post by Taggart »

Even in the 1987 crash I heard about investors on margin who were completely wiped out (and when I look back, that so called crash was just a blip). I've read too much about top investors like Graham and Carret getting burned in the past, and they wouldn't touch margin again.
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Post by adrian2 »

Taggart wrote:Even in the 1987 crash I heard about investors on margin who were completely wiped out (and when I look back, that so called crash was just a blip). I've read too much about top investors like Graham and Carret getting burned in the past, and they wouldn't touch margin again.
It depends on how much margin you use. 5 to 10% of total portfolio value has no chance of getting you wiped out - unless you worry about an Armageddon type scenario.
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Post by Chuck »

adrian2 wrote:
Chuck wrote:After that I will sit tight until/if yields hit 5%. Then I'll take a big bite.
When is the last time any of the Big Canadian Banks yielded 5%?
Years ago. During the tech bubble I believe. I don't really expect to see this level of yield anytime soon but I've learned never to underestimate the foolishness of panicky investors in a sell off. If there is no sell off, there may still be an opportunity if gold and oil stay sexy enough to draw all the investor attention away from boring old banks (similar to the aforementioned tech mania).

In any event, I'm patient. I'm just saying if I see banks cheap I'll load up. I see nothing on the horizon of the Canadian banking landscape that makes me think the fundamentals of banking are changing in any way (for the worse that is, I do see a few positive trends). If I can get 5% or so yield, I will happily wait for years and years to ride out any sort of recessionary induced bumpiness.
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Post by Taggart »

adrian2 wrote:
Taggart wrote:Even in the 1987 crash I heard about investors on margin who were completely wiped out (and when I look back, that so called crash was just a blip). I've read too much about top investors like Graham and Carret getting burned in the past, and they wouldn't touch margin again.
It depends on how much margin you use. 5 to 10% of total portfolio value has no chance of getting you wiped out - unless you worry about an Armageddon type scenario.
"I was scared this morning. I got wiped out on Monday. Tell your readers that you talked to a broker who is long three houses, and two of them are for sale. My boat is for sale, too."
- A broker quoted in the New York Times, October 23, 1987

Not that I'm predicting anything of course.

Markets ‘are like 1987 crash’
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