We recently compiled a list of the 10 Best Bank Stocks With High Dividends. In this article, we are going to take a look at where Bank of Montreal (NYSE:BMO) stands against the other bank stocks.
In 2023, the US banking industry took a major hit, as Silicon Valley Bank collapsed, followed by the downfall of two other major banks. It was the biggest shake-up the industry had seen since the 2008 financial crisis. Despite the US banking crisis, the past two years have been the best for banks since before the Great Recession. Shocking, right?
Banking Sector Performance 2023
According to McKinsey, banks made $7 trillion in revenue and $1.1 trillion in net income globally during 2023, with a return on tangible equity of 11.7%. They have also strengthened their capital and liquidity, with capital levels at 12.8% and liquidity at 77.2%, both improving from 2022. In fact, banks earned more profit than any other sector worldwide last year. Right now, 14% of banks are making up 80% of the industry’s economic profit, which is a big jump from 11% in 2013. This is nearly five times higher than most other industries, where a few big players usually dominate the performance.
In 2023, global dividends surged to a record $1.66 trillion, marking a 5.0% increase on an underlying basis, according to the Janus Henderson Global Dividend Index. The banking sector played a key role in this growth, delivering record payouts and accounting for half of the global increase in dividends. Higher interest rates allowed many banks to expand their margins, with emerging market banks contributing significantly to this increase – though banks in China didn’t join in the dividend boom.
READ ALSO: 10 AI Stocks That Will Skyrocket and 15 AI News That Broke The Internet.
Banking Sector in 2024
The banking sector is anticipated to maintain its strong performance this year, with analysts offering an optimistic outlook. On December 4, 2024, Moody’s upgraded the global banking sector from negative to stable. The credit rating giant is positive because G-20 countries are easing up on interest rates and making some monetary adjustments, which should help with the asset quality and liquidity of banks. The economy seems to be stabilizing, and that should help banks recover, especially in terms of deposits. Of course, there are some risks like geopolitical tensions, trade issues, and possible shifts in the US policies under the new president could create uncertainties that might affect the global economy and the banking sector. So, while things are looking better, there is still some uncertainty on the horizon.
Our Methodology
For this article, we used the Finviz stock screener to filter out bank stocks with dividend yields exceeding 3%. We focused on picking stocks with a consistent record of paying dividends, offering dividend growth, and being financially stable to steer clear of yield traps. The list below is ranked in the ascending order of dividend yields, as of December 6. We have also mentioned the number of hedge fund holders in each firm, which was sourced from Insider Monkey’s Q3 2024 database.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
A well-dressed executive discussing financial strategy with a client in a busy office.
Bank of Montreal (NYSE:BMO)
Dividend Yield as of December 6: 4.62%
Number of Hedge Fund Holders: 14
Bank of Montreal (NYSE:BMO) operates mainly in North America, where it provides financial services including personal and commercial banking, wealth management, and capital markets.
Bank of Montreal (NYSE:BMO) announced a quarterly dividend of C$1.59 per share on December 5, marking a 2.6% increase from the previous dividend of C$1.55. The dividend will be paid on February 26 to shareholders on record as of January 30. This bank has consistently paid dividends to shareholders since 1829 and has increased its payouts annually for the past eight years. That puts BMO on our list of the best bank stocks for a dividend portfolio.
In BMO’s Q4 2024 earnings call, the bank shared that a year ago, it expected higher interest rates and a slowing economy to make things more difficult for business activity, loan demand, and credit. To stay ahead, Bank of Montreal (NYSE:BMO) took early action, managing costs while still supporting customers, which led to solid results. However, credit performance was worse than anticipated, resulting in a drop in net income for the year to $7.4 billion and earnings per share to $9.68. Despite the tough year, there’s a lot to be proud of. The bank saw a 5% increase in pre-tax earnings to $13.4 billion, improved efficiency, and grew its core customer base, with deposits rising by $61 billion or 9%. BMO expects provisions to ease off through 2025.
According to Insider Monkey’s third-quarter data, Bank of Montreal (NYSE:BMO) was present in 14 hedge fund portfolios. Arrowstreet Capital is the largest position holder in the bank, with nearly 1.5 million shares worth $133.2 million.
Overall BMO ranks 3rd on our list of the best bank stocks with high dividends. While we acknowledge the potential of BMO as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BMO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
