An In-depth Look at BMO's Dividend Performance and Sustainability
Bank of Montreal (BMO, Financial) recently announced a dividend of $1.47 per share, payable on 2023-11-28, with the ex-dividend date set for 2023-10-27. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's delve into Bank of Montreal's dividend performance and assess its sustainability.
About Bank of Montreal
Bank of Montreal is a diversified financial-services provider based in North America, operating four business segments: Canadian personal and commercial banking, U.S. P&C banking, wealth management, and capital markets. The bank's operations are primarily in Canada, with a significant portion also in the U.S.
Bank of Montreal's Dividend History
Bank of Montreal has maintained a consistent dividend payment record since 1989. Dividends are currently distributed on a quarterly basis. The bank has increased its dividend each year since 2009, earning it the status of a dividend achiever, a title given to companies that have increased their dividend each year for at least the past 14 years.
Bank of Montreal's Dividend Yield and Growth
As of today, Bank of Montreal currently has a 12-month trailing dividend yield of 5.58% and a 12-month forward dividend yield of 5.73%. This suggests an expectation of increase dividend payments over the next 12 months.
Over the past three years, Bank of Montreal's annual dividend growth rate was 10.20%. Extended to a five-year horizon, this rate decreased to 7.40% per year. And over the past decade, Bank of Montreal's annual dividends per share growth rate stands at 5.90%.
Based on Bank of Montreal's dividend yield and five-year growth rate, the 5-year yield on cost of Bank of Montreal stock as of today is approximately 7.97%.
Dividend Sustainability: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-07-31, Bank of Montreal's dividend payout ratio is 0.56.
Bank of Montreal's profitability rank of 6 out of 10 as of 2023-07-31, suggests fair profitability. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Future Growth Prospects
To ensure the sustainability of dividends, a company must have robust growth metrics. Bank of Montreal's growth rank of 6 out of 10 suggests that the company has a fair growth outlook.
Revenue is the lifeblood of any company, and Bank of Montreal's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Bank of Montreal's revenue has increased by approximately -0.10% per year on average, a rate that underperforms approximately 81.69% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Bank of Montreal's earnings increased by approximately 32.20% per year on average, a rate that underperforms approximately 12.3% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 17.20%, underperforms approximately 23.44% of global competitors.
Conclusion
In conclusion, Bank of Montreal's consistent dividend payments, steady growth rate, and fair profitability and growth metrics make it a viable choice for value investors looking for regular income. However, its performance in terms of revenue and earnings growth compared to global competitors suggests there may be room for improvement. Investors should continue to monitor these factors to ensure the sustainability of the bank's dividends in the future.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
