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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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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
Based in Toronto, Bank of Montreal (BMO) is in the Finance sector, and so far this year, shares have seen a price change of 3.55%. The bank is paying out a dividend of $0.8 per share at the moment, with a dividend yield of 4.04% compared to the Banks - Foreign industry's yield of 1.89% and the S&P 500's yield of 1.43%.
In terms of dividend growth, the company's current annualized dividend of $3.18 is up 1% from last year. Bank of Montreal has increased its dividend 5 times on a year-over-year basis over the last 5 years 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. Right now, Bank of Montreal's payout ratio is 55%, which means it paid out 55% 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 $6.48 per share, with earnings expected to increase 13.09% from the year ago period.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BMO presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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Bank Of Montreal (BMO) : Free Stock Analysis Report
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