Bank of Montreal (TSE:BMO) Is Increasing Its Dividend To CA$1.43
Bank of Montreal (TSE:BMO) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of February to CA$1.43. This takes the annual payment to 4.3% of the current stock price, which is about average for the industry.
See our latest analysis for Bank of Montreal
Bank of Montreal's Payment Expected To Have Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time.
Having distributed dividends for at least 10 years, Bank of Montreal has a long history of paying out a part of its earnings to shareholders. Based on Bank of Montreal's last earnings report, the payout ratio is at a decent 27%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Over the next 3 years, EPS is forecast to fall by 40.0%. Despite that, analysts estimate the future payout ratio could be 41% over the same time period, which is in a pretty comfortable range.
Bank of Montreal Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$2.80 in 2012 to the most recent total annual payment of CA$5.72. This works out to be a compound annual growth rate (CAGR) of approximately 7.4% a year 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
Investors could be attracted to the stock based on the quality of its payment history. Bank of Montreal has impressed us by growing EPS at 20% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Bank of Montreal's prospects of growing its dividend payments in the future.
Bank of Montreal Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Bank of Montreal has 2 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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