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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Bank of Montreal in Focus
Bank of Montreal (BMO) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of 18.3% since the start of the year. The bank is currently shelling out a dividend of $0.83 per share, with a dividend yield of 3.7%. This compares to the Banks - Foreign industry's yield of 1.59% and the S&P 500's yield of 1.37%.
Looking at dividend growth, the company's current annualized dividend of $3.33 is up 5.8% from last year. In the past five-year period, Bank of Montreal has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.13%. 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 53%. This means it paid out 53% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BMO for this fiscal year. The Zacks Consensus Estimate for 2021 is $8.19 per share, which represents a year-over-year growth rate of 42.93%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer 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 have to be mindful 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 #1 (Strong Buy).
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Bank Of Montreal (BMO) : Free Stock Analysis Report
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