Bank of Montreal's (TSE:BMO) Dividend Will Be Increased To CA$1.33

By
Simply Wall St
Published
December 07, 2021
TSX:BMO
Source: Shutterstock

Bank of Montreal (TSE:BMO) will increase its dividend on the 28th of February to CA$1.33. This makes the dividend yield about the same as the industry average at 3.3%.

See our latest analysis for Bank of Montreal

Bank of Montreal's Earnings Easily Cover the Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Bank of Montreal is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 10.3% over the next year. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

historic-dividend
TSX:BMO Historic Dividend December 7th 2021

Bank of Montreal Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the dividend has gone from CA$2.80 to CA$5.32. This means that it has been growing its distributions at 6.6% 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. Bank of Montreal has seen EPS rising for the last five years, at 11% per annum. Bank of Montreal definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Bank of Montreal's Dividend

Overall, we always like to see the dividend being raised, but we don't think Bank of Montreal will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 11 analysts we track are forecasting for Bank of Montreal for free with public analyst estimates for the company. We have also put together a list of global stocks with a solid dividend.

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