Yahoo Finance Bank of Montreal (TSE:BMO) Is Paying Out A Larger Dividend Than Last Year
Bank of Montreal (TSE:BMO) will increase its dividend from last year's comparable payment on the 28th of August to CA$1.47. This makes the dividend yield about the same as the industry average at 5.0%.
See our latest analysis for Bank of Montreal
Bank of Montreal's Earnings Will Easily Cover The Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Bank of Montreal has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Bank of Montreal's payout ratio of 57% is a good sign as this means that earnings decently cover dividends.
Over the next 3 years, EPS is forecast to expand by 43.3%. The future payout ratio could be 54% 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 an extended history of paying stable dividends. The dividend has gone from an annual total of CA$2.88 in 2013 to the most recent total annual payment of CA$5.72. This implies that the company grew its distributions at a yearly rate of about 7.1% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Has Growth Potential
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 6.4% 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.
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. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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