Stock Analysis

Bank of Montreal (TSE:BMO) Is Increasing Its Dividend To CA$1.43

TSX:BMO
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Bank of Montreal (TSE:BMO) will increase its dividend from last year's comparable payment on the 28th of February to CA$1.43. Based on this payment, the dividend yield for the company will be 4.7%, which is fairly typical for the industry.

Check out our latest analysis for Bank of Montreal

Bank of Montreal's Dividend Forecasted To Be Well Covered By Earnings

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. Past distributions do not necessarily guarantee future ones, but Bank of Montreal's payout ratio of 27% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to fall by 40.7%. Despite that, analysts estimate the future payout ratio could be 44% over the same time period, which is in a pretty comfortable range.

historic-dividend
TSX:BMO Historic Dividend December 27th 2022

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 means that it has been growing its distributions at 7.4% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Bank of Montreal has grown earnings per share at 19% 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.

We Really Like Bank of Montreal's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Bank of Montreal (1 can't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Valuation is complex, but we're helping make it simple.

Find out whether Bank of Montreal is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.