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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Bank of Montreal in Focus
Headquartered in Toronto, Bank of Montreal (BMO) is a Finance stock that has seen a price change of -1.29% so far this year. The bank is currently shelling out a dividend of $0.8 per share, with a dividend yield of 4.24%. This compares to the Banks - Foreign industry's yield of 2.07% and the S&P 500's yield of 1.48%.
In terms of dividend growth, the company's current annualized dividend of $3.18 is up 1% from last year. Over the last 5 years, Bank of Montreal has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.39%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Bank of Montreal's current payout ratio is 55%, meaning it paid out 55% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BMO expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $6.44 per share, with earnings expected to increase 12.39% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that BMO is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Bank Of Montreal (BMO) : Free Stock Analysis Report
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