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Bank of Montreal's (TSE:BMO) dividend will be increasing from last year's payment of the same period to CA$1.63 on 26th of August. The payment will take the dividend yield to 4.4%, which is in line with the average for the industry.
Bank of Montreal's Payment Expected To Have Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much.
Bank of Montreal has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Bank of Montreal's last earnings report, the payout ratio is at a decent 58%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, EPS is forecast to rise by 30.2% over the next 3 years. Analysts estimate the future payout ratio will be 51% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
View 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 dividend has gone from an annual total of CA$3.12 in 2015 to the most recent total annual payment of CA$6.52. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. 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 Has Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Bank of Montreal has grown earnings per share at 7.7% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
Bank of Montreal Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.
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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 12 Bank of Montreal analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Bank of Montreal not quite the opportunity you were looking for? Why not check out our selection of top 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.