Stock Analysis

Bank of Montreal (TSE:BMO) Is Increasing Its Dividend To CA$1.47

TSX:BMO
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Bank of Montreal's (TSE:BMO) dividend will be increasing from last year's payment of the same period to CA$1.47 on 28th of August. This takes the annual payment to 4.9% of the current stock price, which is about average for the industry.

View our latest analysis for Bank of Montreal

Bank of Montreal's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

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 57%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 33.6% over the next 3 years. Analysts forecast the future payout ratio could be 51% over the same time horizon, which is a number we think the company can maintain.

historic-dividend
TSX:BMO Historic Dividend July 6th 2023

Bank of Montreal Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was CA$2.88, compared to the most recent full-year payment of CA$5.88. 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 Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Bank of Montreal has been growing its earnings per share at 6.4% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Bank of Montreal that investors need to be conscious of moving forward. 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.