Tuesday, August 6, 2013

Welcome Back BMO

If you’ve been following The Loonie Bin, you might recall that I sold BMO at the beginning of the year because I wasn’t happy with my price point. I don’t normally swing stocks back and forth because it drives up your investment costs with needless transactions. I only pay $9.99 commissions for trades but still, that’s money that could be otherwise invested.

Regardless, I wanted a better price for BMO shares and I got my wish last month during the market correction. I was able to pull the trigger and receive a solid 5% yield on cost for my efforts which will make a solid addition to my portfolio. BMO has been in business before Canada was even a country so even if it has a larger then average yield, I know that they won’t be going anywhere anytime soon.


BMO has a pretty large dividend compared to the other big banks but with a dividend payout ratio of 49.6%, I know the dividend is relatively safe compared to other stocks I own. Sure the dividend history isn’t perfect, but I’m willing to forgive them. As long as the dividend keeps going up or is at least maintained during the next economic collapse, then I’ll be a happy camper.

“Cause four out of five isn’t bad”

With the re-addition of BMO into my portfolio, I now own shares in four of the Big Five Canadian banks. In additions to the shares in IGM and SLF, that’s all the exposure to the financial sector that I really want at this point. Who knows, I may even sell my holdings in IGM and SLF if they don’t increase their dividends and buy more bank shares. This ain’t no charity I’m running; either show me the dividend increases or git!

I could always invest my money in the financial sector in the U.S but that would require a lot more work then I’m willing to put in as well as market timing with the currency conversion. There are so many companies to look into and honestly, I’m not really comfortable with the lack of regulation like there is in Canada. Is that a poor attitude to have? Sure is. Could I be missing out on some great investments? Most definitely. Do you even care, Steve? Sorry, I’m trying to live my life here and have better things to worry about right now!

I want to invest in the country I live in because, well, I live here. I want to keep as much of my investment capital within Canada as possible. There are a few sectors like consumer staples and consumer discretionaries that do not have many Canadian companies to choose from, which forces me to look to U.S markets to help bring balance to my portfolio. I added some paper product, soda pop and pharma producers to help even the scales and it’s working quite nicely. If I can add some JNJ, MCD and maybe TGT and COST I’ll be all set! They are all just so expensive right now that I’d need a small fortune just to fill my U.S wishlist.

Going Forward

Well the dividends keep rolling in and now I think I’ll just let them build up again until I see another good buying opportunity. I know it might seem impossible to those just starting out to get in at a decent price; just keep being patient. Market corrections and stock dips due to lower than expected earnings do happen, you just have to watch for them. You don’t sell a quality stock when they have a bad quarter; you buy more shares from the fools who are selling them.  At least that’s what I’m doing and it seems to be working!
Do you own any shares in BMO?

This article was written by The Loonie Bin. If you enjoyed this article, please consider subscribing to his feed.


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