The S&P/TSX Composite Index has climbed 122 points in early afternoon trading on January 31. Meanwhile, the S&P/TSX Capped Financials Index was up 0.82% at the time of this writing. Financials is the largest sector on the TSX. Canada’s top banks are world renowned for their dependability, especially in the face of economic turmoil. Today, I want to target an undervalued bank stock that is worth your attention in an uncertain market.
Bank of Montreal (TSX:BMO)(NYSE:BMO) is the third largest of the Big Six Canadian bank stocks. Shares of this bank stock have dropped 7.2% year-over-year at the time of this writing. The stock has jumped 7.2% so far in 2023.
Investors can expect to see BMO’s first quarter fiscal 2023 earnings in late February or early March. In fiscal 2022, this top bank delivered adjusted net income of $9.03 billion – up from $8.65 billion in fiscal 2021. Meanwhile, provision for credit losses increased to $313 million compared with $20 million in the prior year. BMO and its peers have moved to prepare for turbulence in a shaky economy.
BMO chief economist Doug Porter recently stated that the Canadian economy was managing to “keep its head above water”. This may not be the most encouraging outlook in the near term, but it does indicate that the broader economy can still be trusted. I’m willing to buy-the-dip on BMO in this climate.
Shares of BMO currently possess a very attractive price-to-earnings ratio of 6.6. Moreover, BMO offers a quarterly dividend of $1.43 per share. That represents a solid 4.2% yield.
