Stock Analysis

Bank of Montreal (TSE:BMO) Will Pay A Larger Dividend Than Last Year At CA$1.47

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The board of Bank of Montreal (TSE:BMO) has announced that it will be paying its dividend of CA$1.47 on the 28th of August, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 4.8%, which is in line with the average for the industry.

See 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.

Bank of Montreal has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 57%, which means that Bank of Montreal would be able to pay its last dividend without pressure on the balance sheet.

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.

TSX:BMO Historic Dividend July 20th 2023

Bank of Montreal Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was CA$2.88 in 2013, and the most recent fiscal year payment was CA$5.88. This works out to be a compound annual growth rate (CAGR) of approximately 7.4% a year 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.

Bank of Montreal Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Bank of Montreal has grown earnings per share at 6.0% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Bank of Montreal Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Bank of Montreal is a strong income stock thanks to its track record and growing earnings. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Bank of Montreal that investors should take into consideration. Is Bank of Montreal not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.