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Interested In Bank of Montreal (TSE:BMO)’s Upcoming CA$0.96 Dividend? You Have 4 Days Left

Important news for shareholders and potential investors in Bank of Montreal (TSE:BMO): The dividend payment of CA$0.96 per share will be distributed to shareholders on 27 November 2018, and the stock will begin trading ex-dividend at an earlier date, 31 October 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Bank of Montreal can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.

See our latest analysis for Bank of Montreal

5 checks you should use to assess a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

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  • Is its annual yield among the top 25% of dividend-paying companies?

  • Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

  • Has dividend per share risen in the past couple of years?

  • Is its earnings sufficient to payout dividend at the current rate?

  • Will the company be able to keep paying dividend based on the future earnings growth?

TSX:BMO Historical Dividend Yield October 26th 18
TSX:BMO Historical Dividend Yield October 26th 18

How well does Bank of Montreal fit our criteria?

The company currently pays out 50% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. However, going forward, analysts expect BMO’s payout to fall to 43% of its earnings, which leads to a dividend yield of 4.0%. However, EPS should increase to CA$9.08, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of BMO it has increased its DPS from CA$2.8 to CA$3.84 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.

Compared to its peers, Bank of Montreal produces a yield of 3.9%, which is on the low-side for Banks stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank Bank of Montreal as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three essential aspects you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for BMO’s future growth? Take a look at our free research report of analyst consensus for BMO’s outlook.

  2. Valuation: What is BMO worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BMO is currently mispriced by the market.

  3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.