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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.
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 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 -1.03%. The bank is paying out a dividend of $0.8 per share at the moment, with a dividend yield of 4.15% compared to the Banks - Foreign industry's yield of 2.18% and the S&P 500's yield of 1.49%.
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%. Future dividend growth will depend on earnings growth as well as 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.
Earnings growth looks solid for BMO for this fiscal year. The Zacks Consensus Estimate for 2020 is $6.34 per share, representing a year-over-year earnings growth rate of 10.65%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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. 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 #2 (Buy).
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Bank Of Montreal (BMO) : Free Stock Analysis Report
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