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Why Bank of Montreal (BMO) is a Great Dividend Stock Right Now
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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Bank of Montreal in Focus
Bank of Montreal (BMO - Free Report) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of 7.69% since the start of the year. The bank is paying out a dividend of $1.05 per share at the moment, with a dividend yield of 3.61% compared to the Banks - Foreign industry's yield of 3.34% and the S&P 500's yield of 1.44%.
Looking at dividend growth, the company's current annualized dividend of $4.19 is up 24.1% from last year. In the past five-year period, Bank of Montreal has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.99%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Bank of Montreal's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
BMO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $10.67 per share, representing a year-over-year earnings growth rate of 3.49%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that BMO is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Why Bank of Montreal (BMO) is a Great Dividend Stock Right Now
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Bank of Montreal in Focus
Bank of Montreal (BMO - Free Report) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of 7.69% since the start of the year. The bank is paying out a dividend of $1.05 per share at the moment, with a dividend yield of 3.61% compared to the Banks - Foreign industry's yield of 3.34% and the S&P 500's yield of 1.44%.
Looking at dividend growth, the company's current annualized dividend of $4.19 is up 24.1% from last year. In the past five-year period, Bank of Montreal has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.99%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Bank of Montreal's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
BMO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $10.67 per share, representing a year-over-year earnings growth rate of 3.49%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that BMO is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).