Bank of Montreal's (TSE:BMO) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Bank of Montreal (TSE:BMO) has announced that it will be paying its dividend of CA$1.67 on the 26th of February, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 3.7%.

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Bank of Montreal's Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Bank of Montreal has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 56%, which means that Bank of Montreal would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 34.1%. The future payout ratio could be 44% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

See our latest analysis for Bank of Montreal

Bank of Montreal Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was CA$3.20 in 2016, and the most recent fiscal year payment was CA$6.68. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

We Could See Bank of Montreal's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Bank of Montreal has impressed us by growing EPS at 9.0% 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, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 13 Bank of Montreal analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.