Bank of Montreal (TSE:BMO) Has Announced That It Will Be Increasing Its Dividend To CA$1.33
Bank of Montreal's (TSE:BMO) dividend will be increasing to CA$1.33 on 28th of February. Based on the announced payment, the dividend yield for the company will be 3.3%, which is fairly typical for the industry.
See our latest analysis for Bank of Montreal
Bank of Montreal's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Bank of Montreal is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Looking forward, earnings per share is forecast to rise by 10.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.
Bank of Montreal Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was CA$2.80 in 2011, and the most recent fiscal year payment was CA$5.32. This means that it has been growing its distributions at 6.6% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Bank of Montreal has seen EPS rising for the last five years, at 11% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Our Thoughts On Bank of Montreal's Dividend
Overall, we always like to see the dividend being raised, but we don't think Bank of Montreal will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 11 analysts we track are forecasting for Bank of Montreal for free with public analyst estimates for the company. We have also put together a list of global stocks with a solid dividend.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
