The recent purchase of three wineries in British Columbia helped this company’s stock rise in the past month. But it’s a licensing deal with a Canadian hockey icon that has produced the biggest growth spurt for Andrew Peller.
The opening of a new Winery and Craft Distillery in Niagara is the latest development in this lucrative licensing deal. As it looks forward to escalating sales—including an anticipated $25 million from its B.C. acquisitions—this stock recently increased its dividend by 10.3%. And it trades at a modest multiple of forecast earnings for 2018.
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ANDREW PELLER LTD. (Toronto symbols ADW.A and ADW.B; www.andrewpeller.com) began operating in 1961 and is Canada’s second-largest wine producer. (Constellation is No. 1.) The company accounts for 14% of the country’s wine sales, and 37% of all the wines produced in Canada.
The company has agreed to buy three wineries in British Columbia’s Okanagan Valley. In all, it will pay $95 million for those businesses. That price consists of $78 million in cash, plus $17 million worth of class A common shares.
To put those amounts in context, Peller’s market cap is $520.8 million.
The company expects to complete the purchase by October 31, 2017. In addition to these purchases, Andrew Peller plans to increase production and packaging efficiencies throughout its Western Canadian operations.
The new wineries will expand Peller’s portfolio of premium-priced brands and add $25 million to its annual sales. They totalled $342.6 million for the fiscal year ended March 31, 2017.
Peller’s sales in the fiscal year ended March 31, 2017, rose 2.5%, to $342.6 million from $334.4 million in 2016. That’s mainly due to strong demand for premium-priced wines, including those the company produces under a long-term licencing deal with hockey star Wayne Gretzky.
Peller also recently opened the Wayne Gretzky Winery and Craft Distillery in Niagara-on-the-Lake, Ontario. This facility that will make both wine and whisky under that brand.
Earnings in 2017 jumped 39.1%, to $0.64 a share from $0.46 (all per share amounts adjusted for a 3-for-1 stock split in October 2016). If you exclude a tax refund and other unusual items, earnings gained 16.1%.
The company raised its quarterly dividend by 10.3% starting with the July 2017 payment, investors receive $0.045 a share, up from $0.0408. The new annual rate of $0.18 yields 1.5% (all per-share amounts adjusted for a 3-for-1 stock split in October 2016).
Andrew Peller shares rose 71.3% in 2016. The stock made modest gains for much of 2017 but has risen 6.1% in the past month following the purchase of the B.C. wineries. And the long-term outlook is good.
The Gretzky brand continues to be a big success story for the company, and should push up its earnings to $0.80 a share for fiscal 2018. Even with the recent increase in the share price, the stock still trades at just 14.9 times that forecast.
Recommendation in The Successful Investor: Andrew Peller is a buy.
Pat McKeough recently replied to a Member of his Inner Circle looking to tap into the growing need for cybersecurity, and asking specifically about the prospects of Check Point Software. The company has seen its revenues rise for the past five years and it invests a healthy portion of its revenue in productive research spending. It continues to add customers around the world and recently released a new product for broad-based security. The market for cybersecurity is growing fast, says Pat, but so is the competition.
Q: Pat, I’m looking to invest in cybersecurity: What is your opinion on Check Point Software? Thank you!
A:CHECK POINT SOFTWARE (symbol CHKP on Nasdaq; www.checkpoint.com) designs and makes firewall security systems to protect computers and mobile devices from online attacks.
The company generates 45.3% of its revenue from software updates and maintenance; 29.0% of its revenue from products and licenses; and 25.7% from software-as-a-service subscriptions.
Check Point first sold shares to the public at $14.00 a share and began trading on Nasdaq on June 29, 1996.
The company’s revenues have risen steadily over the last five years, despite a rising U.S. dollar, which has hurt the contribution of its overseas sales. Overall sales have increased from $1.3 billion in 2012 to $1.7 billion in 2016. Per-share earnings have moved up steadily as well, from $2.96 in 2012 to $4.22 in 2016.
The company’s revenue for the three months ended June 30, 2017, rose 8.0%, to $459.0 million from $422.7 million a year earlier. That’s mostly thanks to growing demand for its subscription-based firewall services.
Earnings, excluding one-time items, increased by 11.6% in the latest quarter, to $212.0 million from $190.0 million. Per-share earnings rose 16.0%, to $1.26 from $1.09 a share, on fewer shares outstanding.
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Growth Stocks: Sales to Europe and other overseas markets growing fastest
Check Point’s strong balance sheet gives it plenty of room to keep developing new products. As of June 30, 2017, it held cash and investments of $1.6 billion, or $9.79 a share. It had no debt.
The company uses some of its cash to buy back shares. In the second quarter, it repurchased 2.3 million shares for $248 million.
Check Point is in a fast-growing, but highly competitive market. However, the company continues to improve its existing products and develop new ones. In the latest quarter, it spent $46.3 million (or a high 10% of its revenue) on research.
In the last quarter, the company launched its newest product, Check Point Infinity, its consolidated cyber security platform designed to prevent attacks across the full spectrum of cyberspace: networks, clouds and mobile.
Check Point has also added more customers worldwide. It now sells 47% of its products and services in the Americas. Sales to Europe (38%) and the rest of the world (15%) are growing the fastest.
The stock trades at 21.0 times the $4.95 a share that the company will likely earn in fiscal 2017.
Inner Circle recommendation: Check Point Software is okay to hold for aggressive investors.
Know the ins and outs that a successful investment funds manager uses to maximize gains
Active management occurs when an investment funds manager picks stocks, rather than simply aiming to match benchmark indexes. To do this, they use research, forecasts, experience and critical judgement to make investing decisions aimed at outperforming the investment benchmarks.
In contrast, there is passive management. Passive management is also known as indexing. There is more work associated with active management than there is with passive management.
Every investor’s retirement guide
You may be a Do-It-Yourself investor or you may have someone else handle your money. Either way, you owe it to yourself to read this report. Pat McKeough’s guide gives you the real secrets of successful wealth management whether you’re planning for retirement or already past your working years. Four decades of proven experience have gone into his comprehensive report “Wealth Management and Retirement Planning”. Read it now.
A successful investment funds manager identifies the best long-term funds this way
First, eliminate anything with “asset allocation” in the name. If the fund’s name includes the term, it means the fund’s managers or sponsors feel they can enhance returns and/or reduce the risks of their funds by switching back and forth among stocks, bonds and cash equivalents, often using a so-called “black box,” a computer program that makes trading decisions based on a pre-selected set of rules for interpreting financial statistics.
Then, eliminate anything with “balanced” in the name. Funds that have the term in their names own stocks and bonds (see why we don’t like long-term bonds below).
Finally, eliminate the theme funds where the theme is plucked from today’s headlines. Theme funds are funds that focus on investments in areas such as solar power and so on. These funds often suffer from pseudo-diversification. That is, they have lots of different stocks in their portfolios, but these stocks all respond to the same economic factors.
Four more tips an investment funds manager uses for making top picks
An investment funds manager should avoid long-term bonds
Regardless of age, we advise all investors to stay out of long-term bonds. That’s because long-term interest rates on bonds are still bumping along near 4%, which doesn’t even cover taxes and inflation for many investors.
Heavy deficit spending by governments, coupled with the rapid expansion of the money supply that’s now underway, could cause an upturn in inflation. That would push interest rates up, and push down the value of existing bonds. Bondholders can, of course, get back the face value of their bonds by holding on to them until they mature. But by then, the bonds’ face value will have lost substantial purchasing power because of inflation.
Stocks are more adaptable to higher inflation than bonds
Stocks can also suffer in a period of rising inflation, of course. But they can still gain if the companies adapt to inflation, as well-managed companies are likely to do. In any event, the value of corporate assets can rise along with inflation. Bonds, in contrast, inevitably lose due to inflation. Their value is denominated in cash—interest payments and repayment of principal at maturity—and inflation shrinks the purchasing power of cash.
Instead of familiarity, we think you should aim for investment quality and diversification. At any given time, lots of prosperous, well-established companies are out of investor fashion. Some of the biggest profits you ever make will come from buying these stocks before they find their way into the limelight.
Note that the broker/media limelight can also create buying opportunities. When brokers and the media turn negative on an investment, they can ignore hidden value and stay negative for longer than they should. When that happens, it can give you the opportunity to add some good investments to your portfolio at bargain prices.
Bonus Tip: Recommendations for passive management
Passive fund management is done often with ETF investments. Passive fund management for ETFs involves investing to mirror the holdings and performance of a specific stock-market index. Traditional ETFs passively follow the lead of whoever sponsors the index.
Sponsors of passive stock indexes such as Standard and Poor’s do from time to time change the stocks that make up the index, and they do tinker with the rules for calculating the index. However, these changes are kept to a minimum. ETFs then adjust their portfolio holdings to reflect these changes, without considering any impact the changes may have on the performance of the ETF portfolio.
This traditional, passive style also keeps turnover very low, and that in turn keeps trading costs for your ETF investments down. We think you should stick with “traditional” ETFs.
Passive investing is growing in popularity. Do you feel investors who only focus on passive investing are missing out on big opportunities?
If you’re ready to put in the time and effort, active fund management could yield big rewards. It could also siphon your earnings back to a broker. When would this type of investment be worth it to you?
How strong is your investing education? Here are some tips you might not know about to cut your risk
Early on, you may learn a few things about investing, and form some opinions. But your investing education really begins after you start to recognize just how much you don’t know (isn’t that how all real learning begins). When you reach that point, you’ll start to look at a much wider range of data and indicators. But, more importantly, you’ll start to pay more attention to investment selection and portfolio structure, and far less to deciding when to buy and sell.
But until you begin that process, you run a big risk of zeroing in on a narrow selection of data that’s irrelevant in the current market, or putting your faith in a single indicator that at best works intermittently.
You can always get lucky, of course. You may zero in on the one point that is most telling for that point in time. But you are more likely to choose an indicator or narrow slice of data that will lead you to miss out on a low-risk opportunity, or lose money. That’s due to simple arithmetic. There are many indicators to choose from, along with a variety of ways to interpret them. At any given time, only a few of the many combinations will lead to profit-making decisions. The same idea applies to the way you sample the data.
Investing education: Financial investing tips to cut risk and increase profits in your stock portfolio
Think like a portfolio manager
Look beyond financial indicators
Hold a reasonable portion of your portfolio in U.S. stocks
Give your investments time to pay off
Investment education: Focus on investment quality and diversification
Early in their investment careers, many investors pick up on the idea that the best way to control stock-market risk is to figure out which way stock prices are headed next, then invest accordingly. This, though, turns out to be much harder than it sounds. It’s easier—and more profitable—to focus on investment quality and diversification.
You’ll do even better if you follow our three-part Successful Investor strategy.
Here’s a simple refinement you can add to our three-part strategy. It will improve your results all the more. Buy stocks regularly during your working years, regardless of the market outlook. Sell stocks gradually in retirement, when you need money to supplement your income from dividends and other sources.
Investing education: A diversified portfolio is a smart decision
A diversified portfolio consists of investments spread across the five main economic sectors as well as a range of individual stocks.
Most investors should have investments in most, if not all, of the five sectors. The proper proportions for you depend on your temperament and circumstances.
Conservative or income-seeking investors may want to emphasize utilities and Canadian banks for their high and generally secure dividends.
More aggressive investors might want to increase their portfolio weightings in Resources or Manufacturing stocks. For example, more aggressive investors could consider holding as much as, say, 25% to 30% of their portfolios in Resources. However, you’ll want to spread your Resource holdings out among oil and gas, metals and other Resources stocks for diversification within the sector, and for exposure to a number of areas.
Investing education: Seek these types of high-quality, more safe investments
At TSI Network we feel that stocks that have been paying dividends for over 10 years are some of the safest investments you can make. Dividends are a sign of quality and a company’s financial health. Types of stocks that we consider to be safer investments include Canadian banks and utilities.
There are also a host of other key indicators to determine if a stock is a safer investment, like management integrity, its growth prospects and its stock price in relation to its sales, earnings, cash flow and so on.
For a true measure of stability, focus on those companies that have maintained or raised their dividends during an economic or stock-market downturn. We think investors will profit most—and with the least risk—by buying shares of well-established, dividend-paying stocks with strong growth prospects.
Researching and building your investing education can be time consuming. Do you think it’s a worthy way of spending your time, or do you find it better to try and replicate the investing pursuits of other well-known investors instead?
Investing is always a gamble, but can smart investors put the odds in their favour, or is it just luck? What would you tell a young investor?
The best Canadian ETFs can be a really good addition to your portfolio—if you choose carefully
With the best Canadian ETFs you won’t incur the regular capital gains taxes generated by the yearly distributions most conventional mutual funds pay out to unitholders.
Canadian exchange traded funds are also eligible for the Canadian dividend tax credit, although this only applies to Canadian ETFs that pay dividends.
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Here’s how you can find the best Canadian ETFs by following the five tips below.
1. Use passive techniques to reduce trading costs.
ETFs generally practice “passive” fund management, in contrast to the “active” management that conventional mutual funds provide at much higher costs. Traditional ETFs stick with this passive management—they follow the lead of the sponsor of the index (for example, Standard & Poors). Sponsors of stock indexes do from time to time change the stocks that make up the index, but generally only when the market weighting of stocks change. They don’t attempt to pick and choose which stocks they think have the best prospects.
This traditional, passive style also keeps turnover very low, and that in turn keeps trading costs for your ETF investment down.
2. The cost of holding the best Canadian ETFs is lower than holding mutual funds.
Compared to mutual funds, ETFs are less expensive to hold. ETFs give you a low-cost way to invest in a market segment. That’s typically cheaper than investing in a mutual fund with a similar focus. With fees as low as 0.10% a year for ETFs vs. mutual fund companies that can charge you 2% to 3% or higher on their funds. ETFs can save you a lot of money and boost your returns over time.
If you decide to invest in individual stocks, as well as Canadian exchange-traded funds, you should take care to spread your money out across most if not all of the five main economic sectors: Finance, Utilities, Consumer, Resources & Commodities, and Manufacturing & Industry.
3. Be wary of theme-based exchange traded funds to avoid losses
It’s important to note that not all ETFs are created equal. For example, there are a lot of ETFs that have been created to tap into popular, but risky, themes and fads. So you need to be very selective with your ETF holdings.
Theme investing has a natural appeal. It simplifies things. Investors like it because they feel it can put their investment returns into overdrive. Some also feel it adds fringe benefits to their investing, by letting them support social or environmental objectives. Brokers also like it because it gives them a rationale to recommend a variety of stocks.
When you focus on theme investing, however, it’s easy to overlook the fundamentals.
4. Seek out aggressive ETFs only if they’re investing in well-established small companies that dominate their markets
Aggressive ETF selections tend to be more highly leveraged and more volatile than conservative ETFs, and they can give you bigger gains and bigger losses. This may be due to financial leverage, or to the risk in their industry or particular situation, or our estimation of upcoming changes in that risk. Keep in mind, though, that these or any aggressive investments should make up no more than, say, a third of most investor portfolios.
Ultimately, the percentage of your portfolio that should be held in either conservative or aggressive investments depends on your personal circumstances. An investor with a longer time horizon or without the need for current income from a portfolio can invest some money in aggressive ETFs or stocks.
5. The role of technical analysis in choosing the best Canadian ETFs.
Technical analysis is a useful tool, but only if you recognize it as one of many tools. Before making any recommendations or transactions in client accounts, I always look at a chart. However, I don’t look at the chart for a prediction of what’s going to happen. I look to see if the pattern on the chart seems to support the view I’ve formed of the stock, based on its finances and other fundamental factors.
I find it encouraging if the two seem congruent, and they usually do. But sometimes one contradicts the other, and that’s when I know I have to dig deeper, and perhaps wait until the situation clarifies itself.
Some investors decide when to buy an ETF with the help of technical analysis. What drives your decision on when to buy your ETFs?
You can’t predict stock market corrections, and trying to will inevitably hurt your returns
Stock market corrections are temporary setbacks in stock prices.
There is a difficulty faced when trying to predict stock market corrections. The task relies on a lot of guesswork. On the whole, it does more harm than good to investor finances.
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Stock market corrections don’t follow any predictable schedule or cycle
Depending on what you look at, you can almost always make a case that we’re due for one. More often than not, you’ll be wrong. There are too many different factors that can touch off a correction, or stop one from happening.
Many correction predictions start with the idea that the market has gone up “too far, too fast,” as the saying goes. This, though, depends on what time period you look at.
The market never gets so high that it can’t go higher
It’s true that the market periodically rises to exaggerated, outrageous, even silly heights. But any connection or similarity between or among any two (or more) of these peaks is trivial, subjective or both. You can spot these heights in hindsight only.
Many advisors have come up with rules that aim to help you decide if a correction is imminent. They aim to help you spot a time when you can sell some or all of your stocks, prior to a drop that’s deep enough that you’ll be able to buy them back at a lower total cost. When any of these rules “work”, however, it’s a coincidence. None work consistently.
The classic way to judge whether the market is cheap or expensive is to compare returns available from stocks, on the one hand, and the interest rates on bonds, on the other. When stocks give you higher yields than bonds, we see little point in buying bonds or other fixed-return investments in most portfolios.
P/E ratios and stock market corrections
Some investors try to predict coming stock market corrections by comparing current and past p/e ratios (the ratio of stock prices to per-share earnings). To do that, you have two types of p/e’s to work with.
One p/e type uses an historical “e”—past earnings. The drawback to this approach is that the market responds much more to future events than to historical events.
The other p/e type focuses on a future “e”—earnings forecasts. The trouble here is that nobody can consistently predict future earnings for individual companies, let alone earnings for the market, as a whole. Even if you had that superhuman forecasting ability, you could still guess wrong on market trends and corrections. That’s because p/e ratios rise and fall unpredictably.
Right now, p/e ratios vary widely, depending on what group of stocks you look at. For example, p/e ratios in the Resources & Commodities sector are high, because earnings are depressed by the general low levels of many commodity prices.
P/E ratios are just one measure of value
Successful investors treat p/e’s as just one of many tools for conducting stock research, not a deciding factor. That’s because by themselves, p/e’s can steer you wrong on individual stocks, and on the market in general. As well, there are lots of stocks out there that are cheap on a p/e basis. But many will remain cheap — their share prices won’t be rising any time soon.
When conducting stock research, you need to ask yourself if a p/e is telling you something by being unusually high or low. In the worst cases, buying stocks with low p/e and thinking that alone means you’re buying value, is often like boarding a train before it derails.
Stock market corrections are a near-constant risk
Market corrections are a near-constant risk. Unpredictable, unexpected political or international events can trigger them. You’re better off to disregard this risk. Instead, with our portfolio management clients, we focus on their investment goals, financial circumstances and temperament. We base investment decisions on the quality, diversification and balance of the stocks in their portfolios.
There are times when I suspect the market is headed for a correction. I don’t guess right every time, of course—neither does anybody else. In any event, this is not one of those times. Instead, we see reason to be optimistic on the long-term stock-market outlook. That’s when successful investors make most of their profits. But you only make money if you are in the market.
With all the Trump news this week and the impact to the markets, have you been thinking about going more into cash?
These ETFs focus on similar Canadian stocks but there is a difference between their fees.
These two Canadian ETFs hold mostly blue-chip stocks that are widely traded on Canadian exchanges. Each ETF mirrors, or tracks, the performance of a major stock market index. That’s different from narrower indexes that focus on resources or themes such as solar power or biotech.
Of course, you pay brokerage commissions to buy and sell these ETFs. But the differences between their MERs is also a consideration.
Below, we update our advice on these ETFs—on buy and one we don’t recommend.
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ISHARES S&P/TSX 60 INDEX ETF (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good low-fee way to buy the top stocks on the TSX. Specifically, the units are made up of stocks that represent the S&P/TSX 60 Index—the 60 largest, most heavily traded stocks on the exchange.
The ETF began trading on September 28, 1999. Expenses are now just 0.18% of assets, and it yields 2.7%.
The S&P/TSX 60 Index mostly consists of high-quality companies. However, it must ensure that all sectors are represented, so it holds a few we wouldn’t include.
The fund’s top holdings are Royal Bank, 9.0%; TD Bank, 8.2%; Bank of Nova Scotia, 6.1%; Suncor Energy, 4.8%; CN Railway, 4.6%; Bank of Montreal, 4.1%; BCE, 3.8%; Enbridge, 3.5%; TransCanada Corp., 3.5%; and Canadian Natural Resources, 3.2%.
Recommendation in Canadian Wealth Advisor: iShares S&P/TSX 60 Index ETF is a buy
ETFs: Higher MER for the iShares MSCI Canada Index Fund
ISHARES MSCI CANADA INDEX FUND (New York symbol EWC; buy or sell through brokers; ca.ishares.com) holds the stocks in the Morgan Stanley Capital International Canada Index.
The fund has a 0.49% MER and yields 2.0%. It began trading on March 12, 1996.
The ETF’s top holdings are: Royal Bank, 8.2%; TD Bank, 7.4%; Bank of Nova Scotia, 5.4%; Suncor Energy, 4.4%; CN Railway, 4.3%; Bank of Montreal, 3.8%; and TransCanada Corp., 3.1%.
If you want to own a Canadian index fund, you should buy the iShares S&P/TSX 60 Index ETF (see page 4). You’ll pay about a third of the management fees.
Recommendation in Canadian Wealth Advisor: We don’t recommend the iShares MSCI Canada Index Fund.
Leon’s Furniture saw a profit jump based on cost cutting as well as increasing sales as its integration of The Brick has gone well.
LEON’S FURNITURE LTD. (Toronto symbol LNF; www.leons.ca) steadily increased the number of stores under the Leon’s banner from 27 in 2003 to today’s 84.
In March 2013, the company almost quadrupled in size with the $700 million purchase of its main rival, The Brick. That chain now has 221 locations across Canada and still operates separately.
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Leon’s continues to expand: in early 2016, the company took over the leases on eight Sears Home stores, in B.C., Ontario and Atlantic Canada. It has converted those showrooms to Leon’s stores and in the process has launched that brand in the important B.C. market.
In the three months ended September 30, 2016, Leon’s sales rose 4.9%, to $575.7 million from $548.9 million a year earlier. On a same-store basis, sales gained 4.1%. More effective promotions led to the increase.
The company earned $31.3 million, or $0.44 a share, in the quarter. That’s an increase of 26.5% from $24.7 million, or $0.35, a year earlier. The growth came mostly from the strong sales, but also from cost cutting.
Looking for the best mining stocks? Here’s how to find them
Leon’s took a risk with an acquisition as big as The Brick. But the integration has gone well, and the move enhances the company’s long-term prospects. The stock trades at 15.5 times its forecast 2017 earnings of $1.15 a share. The shares yield 2.3%.
Pat McKeough recently replied to an Inner Circlememberlooking for an opinion on this leading cement producer. The stock has jumped on rising construction, says Pat. But it still faces challenges.
Q: Hi Pat: Could you comment on Cemex please and let me know if it is okay to hold? Thanks.
A:CEMEX S.A.B. DE C.V. (ADRs) (symbol CX on New York; www.cemex.com) is a Mexican company engaged in the production, distribution, marketing, and sale of cement, ready-mix concrete and aggregates.
Cemex continues to work to improve its balance sheet: this year, it sold assets to raise $2 billion U.S.; and it plans to sell more assets to further cut that debt an additional $1 billion to $1.5 billion in 2017. The company’s total debt now stands at about $12.8 billion U.S., or 113% of its market cap.
Rising residential construction activity in the U.S.—along with increased Mexican infrastructure projects—has helped to push up Cemex’s ADRs from $3.50 at the start of this year.
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Overall, the company’s prospects are tied to local construction activity in each of its six regions: Mexico, the U.S., Northern Europe, the Mediterranean region, South America and the Caribbean, and Asia.
Due to its size, Cemex has a number of advantages, including lower costs. Potential competitors also face high barriers to entering the market, including the challenge of obtaining permits for new quarries and cement plants.
Government and large construction companies account for the majority of cement demand in developed markets. Mexico and South America are different: direct sales to small contractors and homebuilders account for 65% of demand.
To increase its share of that retail business, Cemex uses its Construrama distribution network to sell its cement to individual builders at more than 2,200 locations throughout Latin America. This allows the company to dominate the retail market.
For example, an estimated 6 out of 10 bags of cement sold in Mexico and Colombia are sold at Construrama stores. This gives Cemex a lot of pricing power over its customers.
Advice for beginners—watch out for on-line “practice accounts”
But even with its competitive advantages, Cemex still needs steady construction activity in the markets it serves to keep its profits and cash flow rising.
The company’s ADRs trade at 16.8 times its forecast earnings of $0.48 per ADR.
Inner Circle recommendation: Cemex ADRs are okay to hold, but only for highly aggressive investors.
All five of Canada’s big banks have moved up strongly in the past year, as demand for new mortgages and loans remained strong. They have also built up their online and mobile banking operations, which will cut their future operating costs. With these advantages in mind, the Bank of Montreal is trading at a moderate multiple of future earnings.
BANK OF MONTREAL (Toronto symbol BMO; www.bmo.com) recently closed some branches and upgraded its Internet and mobile banking operations. Thanks partly to savings from that plan, Bank of Montreal’s earnings in the quarter ended October 31, 2016, rose 10.4%, to $1.4 billion, or $2.10 a share. A year earlier, it earned $1.3 billion, or $1.90.
Earnings from Canadian retail banking (39% of the total) rose 5.3%, as loan demand from consumers and businesses remained strong. U.S. retail banking (15%) saw its profits jump 34.5%. That was due to Bank of Montreal’s recent acquisition of General Electric’s transportation-financing operation. That business lends money to commercial truck and trailer manufacturers in the U.S. and Canada. It also offers loans to dealers and buyers.
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Earnings at the bank’s capital markets operations (26%) gained 63.6% on higher trading volumes and advisory fee income. Earnings at the wealth management division (20%) improved 11.4% thanks to higher stock market values.
Value Stocks: Another dividend increase in February 2017
Overall, Bank of Montreal’s loan-loss provisions jumped 35.9% in the quarter, to $174 million from $128 million a year earlier. The increase was partly due to the U.S. GE financing acquisition.
The bank will increase its quarterly dividend by 2.3% with the February 2017 payment, to $0.88 a share from $0.86. The new annual rate is $3.52 and yields 3.8%.
Bank of Montreal will likely earn $7.57 a share in fiscal 2017, and the stock trades at just 12.3 times that estimate.
Recommendation in The Successful Investor: BUY
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Privacy Policy and Terms of Use
The Successful Investor Inc. and its affiliate Successful Investor Wealth Management (referred to hereafter as TSI Network) know that you care how information about you is used and shared, and we appreciate your trust that we will do so carefully and sensibly. This notice describes our privacy policy. By visiting websites owned by or associated with TSI Network, you are accepting the practices described in this Privacy Policy.
This privacy policy is applicable to all TSI Network Visitors, Clients, Employees, Suppliers, Web sites, Management, and all other interested parties. Any links to or from our site are not covered by this policy. We encourage you to read the privacy policies of every site that you visit.
The privacy of the site/store visitor is very important to TSI Network, and is respected at all times. The information we receive from customers helps us to personalize and continually improve your online experience at TSI Network.
We do not collect or disclose personal information, except when it is provided to us voluntarily by the site/store visitor with their consent.
We store subscriber and password files containing personal information securely. These files are stored in secure areas that are not accessible to the general public. We are always working to ensure the security of your personal information.
We are continuously in the process of improving our sites and services. If any new features or policies require a change to this current policy, we will post a clear notice of this change on pages of our site where the privacy policy appears. The principle behind this privacy policy is to collect information with your knowledge and consent.
What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
Information You Give Us: We receive and store any information you enter on our website or give us in any other way through sign-up forms or ordering forms for publications and services. You can choose not to provide certain information, but then you might not be able to take advantage of many of our services and features. We use the information that you provide for such purposes as responding to your requests, customizing your web browsing experience for you, improving our website, and communicating with you.
Automatic Information: We receive and store certain types of information whenever you interact with us. For example, like many websites, we use "cookies," and we obtain certain types of information when your web browser accesses TSI Network.
Information from Other Sources: For reasons such as improving personalization of our service (for example, providing better product recommendations or special offers that we think will interest you), we might receive information about you from other sources and add it to our account information. We also sometimes receive updated delivery and address information from our shippers or other sources so that we can correct our records and deliver your next purchase or communication more easily.
We do reserve the right, however, to collect and perform statistical analyses of the internet traffic to our website for our internal use. However, information collected does not allow us to identify any individual, and will not collect any personal information of the visitor. Furthermore, we do not sell, rent or loan to any outside parties the information collected and analyzed.
Although you may be able to access some of our websites without being required to register or provide personal information, certain websites and sections of our websites may require registration. In addition, if you choose to contact us to ask a question, we will collect your personal information so that we can respond to your question.
To make the visitor’s experience on our website easier, we may use per-session “cookies” (session identifiers) to track the state of the visitor session. This “cookie” is destroyed when your session with our website is over.
Cookies are alphanumeric identifiers that we transfer to your computer's hard drive through your web browser to enable our systems to recognize your browser and to provide features like "Remember Me" for our paying subscribers. Cookies are also used during the ordering process to help ensure your order is handled correctly. We do not extract any information about individual users or their computers as a part of this process.
The "Help" portion of the toolbar on most browsers will tell you how to prevent your browser from accepting new cookies, how to have the browser notify you when you receive a new cookie, or how to disable cookies altogether. However, cookies allow you to take full advantage of some of TSI Network's most useful features, and may be required to access certain areas of our website.
Internet Protocol (or IP) addresses are collected for all visitors to this site. This information is used for the purposes of traffic analysis.
Does TSI Network Use the Information It Receives?
"Contact Us" and Comment Features: TSI Network encourages visitors to its websites to contact us with questions and comments. Email addresses and other information of persons using these features may be collected in order to facilitate our responses to those inquiries.
Purchases of Merchandise: TSI Network websites may offer individuals the opportunity to purchase branded or other merchandise online. In connection with those purchases, customers may be asked to submit personal information, such as shipping addresses and credit card information, which is required to complete the transaction. TSI Network may also offer a Membership program, through which purchasers of its products may receive discounts on their online purchases. Membership registration may involve the submission of personal information to TSI Network and assignment of a user ID and password.
Agents: We employ other companies and individuals to perform functions on our behalf. Examples include fulfilling orders, delivering packages, sending postal mail and email, removing repetitive information from customer lists, analyzing data, providing marketing assistance, processing credit card payments and providing customer service. They have access to personal information needed to perform their functions, but may not use it for other purposes.
Promotional Offers: We may make our postal mailing list available to organizations offering products or services that might interest you. If you prefer NOT to receive these offers, please send an email with your name and address to service@tsinetwork.ca with "Do Not Rent Name" in the subject line. We do NOT make our email list available outside our organization.
Protection of TSI Network and Others: We release account and other personal information when we believe release is appropriate to comply with law; enforce the terms of the Legal notices that accompany this policy; or protect the rights, property or safety of TSI Network, our users or others. This includes exchanging information with other companies and organizations for fraud protection and credit risk reduction.
In addition to these limited disclosures of personal information, TSI Network may provide its affiliates or unaffiliated third parties with aggregate information about visitors to our sites. For example, we might disclose the median ages of visitors to our websites, or the numbers of visitors to our websites that come from different geographic areas. Such aggregate information will not include information of any individual visitors to our websites.
TSI Network may provide personal and other information to a purchaser or successor entity in connection with the sale of TSI Network, a subsidiary or line of business associated with TSI Network, or substantially all of the assets of TSI Network or one of its subsidiaries, affiliates or lines of business.
With Your Consent: Other than as set out above, you will receive notice when information about you might go to third parties, and you will have an opportunity to choose not to share the information.
Except as provided herein, TSI Network will not sell or rent personal information about you to unaffiliated third parties.
We may disclose personal information you have provided through our websites, for the above purposes, to persons or companies that we retain to carry out and other activities for which you have registered or in which you have otherwise asked to participate. In particular, we may for these purposes transfer information to any country (including the USA and other countries which may not offer the same level of data protection as Canada). We also will disclose personal information if required by law, including compliance with warrants, subpoenas or other legal processes.
TSI Network requires persons and companies to which it discloses personal information to restrict their use of such information to the purposes for which it has been provided by TSI Network, to adequately protect the information, and not to disclose that information to others. TSI Network cannot be responsible, however, for any damages caused by the failure of unaffiliated third parties to honour their privacy obligations to TSI Network. Similarly, TSI Network is not responsible for the privacy policies and practices of other websites that are linked to our websites.
COMMENTS: TERMS OF USE
We’re always happy to receive feedback, comments and ideas from TSI Network visitors, and we encourage you to add your perspective to any issue by leaving your comments on the site.
To make sure users get the most out of the site’s comments function, we’ve provided a few guidelines:
Do not post threatening, harassing, defamatory, or libelous material.
Do not intentionally make false or misleading statements.
Do not offer to sell or buy any product or service.
Do not post material that infringes copyright.
Do not post information that you know to be confidential or sensitive or otherwise in breach of the law.
TSI Network will not accept responsibility for information posted in the comments.
Please note that we reserve the right to delete or edit all comments. As well, we may close posts to further comments at our discretion. If a user repeatedly abuses our comment policy, we may also revoke that user’s access to our comments section.
By commenting on TSI Network, you agree that you retain all ownership rights in what you post on the site, and that you will relieve us from any and all liability that may result from those postings.
Special Note for Parents
TSI Network does not sell products for purchase by children. If you are under 18, you may use TSI Network's site only with involvement of a parent or guardian
How do we protect your personal information?
TSI Network does everything possible to prevent unauthorized intrusion to its websites and the alteration, acquisition or misuse of personal information by unauthorized persons. Notably passwords submitted by users of our websites are encrypted using encryption mechanisms. However, TSI Network cautions visitors to its websites that no network, including the Internet, is entirely secure. Accordingly, we cannot be responsible for loss, corruption or unauthorized acquisition of personal information provided to our websites, or for any damages resulting from such loss, corruption or unauthorized acquisition.
How do we maintain the integrity of your personal information?
TSI Network has procedures in place to keep your personal information accurate, complete and current for the purposes for which it is collected and used. You may review the information that you have provided to us and where appropriate you may request that it be corrected. If you wish to review your personal information please send a request to: service@tsinetwork.ca.
How do I withdraw my consent to use Personal Information? Access, Correction, Inquiries and Complaints
If you wish to request access to, or correction of, your personal information in our custody or control, or find out how we've used or disclosed that information, please make your request in writing to us. We may need to verify your identity before searching for or providing you with personal information. In some circumstances, we may not be able to provide access to your personal information, for example if it contains the personal information of other persons, if it constitutes confidential commercial information, or if it is protected by solicitor-client privilege. If we deny your request for access to, or refuse a request to correct, your personal information, we will advise you of the reasons for this refusal.
If you do not want to receive promotional offers, please notify TSI Network by sending an email to service@tsinetwork.ca.
How can you ask questions about our Privacy Policy and access your personal information?
The provision of information by you is entirely voluntary and you have the right not to provide information. Subject to applicable law, you may have the right to receive certain information as to whether or not personal information relating to you is held by TSI Network and to obtain a copy of such information that is sought. You may also have the right to require information, where appropriate, to be erased, blocked or made anonymous or to have data updated or corrected. If you do not wish TSI Network to hold information about you or if you wish to have access to information, modify information, or object to any processing of information or if you have questions please contact us.
What Choices Do I Have?
As discussed, you can always choose not to provide information even though it might be needed to make a purchase or to take advantage of TSI Network features.
You can add or update certain information as explained in the section "How Can I Change My Information?"
If you do not want to receive email or other mail from us, please notify TSI Network by sending an email to service@tsinetwork.ca.
The "Help" portion of the toolbar on most browsers will tell you how to prevent your browser from accepting new cookies, how to have the browser notify you when you receive a new cookie, or how to disable cookies altogether. However, you will not be able to use important features of TSI Network sites if you do not use cookies.
Changes to this Policy
This Policy is the sole authorized statement of TSI Network's practices with respect to the collection of personal information through TSI Network's websites and the subsequent use and disclosure of such information. Any summaries of this Policy generated by third party software or otherwise (for example, in connection with the "Platform for Privacy Preferences" or "P3P") shall have no legal effect, are in no way binding upon TSI Network, shall not be relied upon in substitute for this Policy, and neither supersede nor modify this Policy.
TSI Network may revise this Policy from time to time.
Legal Notices and Disclaimers
The contents of this web site and our publications are based upon sources of information believed to be reliable, but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion reflects the Successful Investor’s judgment at the date of publication and neither the Successful Investor, nor any of its affiliated companies, nor any of their officers, directors or employees, accepts any responsibility in respect of the information or recommendations contained in the publications or on this web site. Moreover, the information or recommendations are subject to change without notice.
Information presented on this web site or contained in our publications is not an offer, nor a solicitation, to buy or sell any securities referred to on the web site or in the publications. The material is general information intended for recipients who understand the risks associated with an investment in any securities referred to in the publications or on this web site. The Successful Investor has made no determination regarding whether an investment, course of action, or associated risks are suitable for the recipient.
