As we head into the final day of 2015 investors are beginning to line up investment picks for their 2016 TFSA contributions.
Here are the reasons why I think Bank of Montreal (TSX:BMO)(NYSE:BMO) and RioCan Real Estate Investment Trust (TSX:REI.UN) are worth a look.
Bank of Montreal
Bank of Montreal is often left off the list when investors are considering a bank stock for their portfolios, but that might begin to change.
The bank has a very balanced revenue stream, and investors are now reaping the benefits from the company’s U.S.-based operations, which continue to grow.
Bank of Montreal first entered the U.S. retail market in the 1980s when it purchased Chicago-based Harris Bank. The brand has done well, and Bank of Montreal decided to go all-in on the U.S. recovery when it purchased Wisconsin-based Marshall & Ilsley for US$4.1 billion in 2011.
Today, BMO Harris Bank has more than 500 branches serving two million clients.
Bank of Montreal also just announced the acquisition of GE Capital’s Transport Finance business, which will add strength to the commercial segment of the U.S. operations.
The bank earned about $4.7 billion in fiscal 2015, with 21% coming from the U.S. operations. Investors should see continued strength from the U.S. division in 2016.
Bank of Montreal pays a quarterly dividend of $0.84 per share that yields 4.2%.
RioCan
Riocan operates more than 300 shopping centres in Canada and another 49 in the United States.
The stock has pulled back a bit in the second half of 2015 as investors worry about the Canadian economy, rising rates south of the border, and the threat of online shopping.
These concerns are certainly worth considering, but I think the selloff in the stock is overdone.
RioCan’s anchor clients tend to be large, stable companies that are capable of riding out an economic downturn because they operate in the grocery, pharmacy, discount item, and household goods sectors.
These businesses provided the basic necessities of daily life and will do well regardless of the situation in the economy. They also have little competition from online vendors due to the spread-out nature of most Canadian cities. Think about it. How many people do you know who order their groceries online?
RioCan recently announced the sale of its 49 U.S. properties for $2.7 billion. The deal will generate net proceeds of about $1.2 billion that will be used to reduce debt and shore up the balance sheet for further development opportunities.
Riocan pays a monthly distribution of 11.75 cents per share that yields about 5.8%.
