Bank of Montreal (BMO.TO)

(A Top Pick Oct 26/11. Up 5.38%.)

(A Top Pick Aug 15/12. Up 4.8%.) Preferred Share Alternative. Buy BMO at $57.21. Sell BMO Jan’15 50 Calls at $9.10.

Has an upside of 12% to his model price of $66. Just broke out of a level that it has been banging it’s head on for the last 11 weeks. Even if there was a stock market correction, this wouldn’t get hit much.

Just raised their dividend by 3% and beat last quarter by 7%. One of the problems with this bank relative to the others is that its netted interest margins are quite low at about 1.7% and they don’t have as impressive an efficiency ratio. However, he likes all the banks in general here. Try to buy it at a moving average line such as a 50 day, which is around just below $58 or $57.70.

(Market Call Minute.) Likes the dividend. All the banks have pretty good moves here but he doesn’t think banking is a great growth business. If you want to own a dividend paying stock, fine.

(Market Call Minute) Doing well in the US.

Pays a very attractive yield, close to 5%. Likes the banks as a group, which are trading below market multiple. They will get some growth and return capital to shareholders.

Has not raised dividend for 5 years and then raised it this week. Has become a greater dividend payer and payout ratio is lower so they are set for further dividend increases. A long term holding of his. New dividend increase was coming and expect they will continue to raise it down the road.

Doesn't own this, predominantly because of their US exposure. Prefers Toronto Dominion (TD-T) to take advantage of a sustained US recovery, then Bank of Nova Scotia (BNS-T). You will do okay with BMO but it is not a top bank pick for him.

(A Top Pick Oct 26/11. Up 1.43%.) Still likes. Thinks there are some cost synergies that they can eke out of their US bank. Also thinks there is an opportunity for them to grow their loan book. 4.8% dividend with a good possibility of it being increased next year.

Cdn banks in general are very expensive right now. Considering indebtedness of Canadians and concerns about real estate, it is hard to imagine their loan book growing dramatically. Pays a decent dividend and thinks this will continue. Don’t think you’ll get much more than you are getting now.

Preferred Share Alternative. Buy BMO at $57.21. Sell BMO Jan’15 50 Calls at $9.10. Net cost is $48.11. Annual yield to Call is 7.4%. This is for people who are seeking income in a tax advantage fashion. This bank has a dividend yield of about 4.48%. If he takes the stock and sells a Call option at $50 ($7.21 below where it was when he put this together) he’ll get about $9.10 in premium, which reduces his cost of the stock to $48.11 but he is still collecting the dividend.

Very good company. A lot of US exposure. On the banking side, he would favour looking at US banks where the valuations are much more depressed. Feels US banks will benefit as the US housing market picks up.

(Market Call Minute) She doesn’t like the banks right now.

Likes the Canadian banks as a group. This probably has one of the highest yields in the sector. Dividend growth may not be as strong as some of the others but the dividend is safe. Valuation is reasonable.