Bank of Montreal (TSE:BMO) Will Pay A Dividend Of CA$1.55

The board of Bank of Montreal (TSE:BMO) has announced that it will pay a dividend on the 26th of November, with investors receiving CA$1.55 per share. Based on this payment, the dividend yield for the company will be 5.0%, which is fairly typical for the industry.

View our latest analysis for Bank of Montreal

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

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Bank of Montreal has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 70%, which means that Bank of Montreal would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 47.5%. The future payout ratio could be 53% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Bank of Montreal Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of CA$3.04 in 2014 to the most recent total annual payment of CA$6.20. This means that it has been growing its distributions at 7.4% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Although it's important to note that Bank of Montreal's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Is Bank of Montreal not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.