Banks In The Great White North: Bank Of Montreal

Jan. 3.13 | About: Bank of (BMO)

The Bank

Bank of Montreal (NYSE:BMO) is one of the "Big 5" banks in Canada, ranking number 4 in market capitalization behind Royal Bank (NYSE:RY), Toronto-Dominion Bank (NYSE:TD), Bank of Nova Scotia (NYSE:BNS), but ahead of Canadian Imperial Bank of Commerce (NYSE:CM). All of the "Big 5" banks trade on both NYSE and TSX.

Dividend and Yield

According to the bank's website:

BMO Financial Group is the longest-running dividend-paying company in Canada. BMO's policy is to pay out 40% to 50% of its earnings in dividends to shareholders over time.

BMO currently pays CDN $2.88 (~$2.92 USD) per share, yielding 4.61% at the closing price of $61.19 CDN ($62.10 USD). Compare this to JP Morgan (NYSE:JPM), Goldman Sachs (NYSE:GS), Wells Fargo (NYSE:WFC) and PNC Financial (NYSE:PNC), which are yielding half as much as BMO.

Dividend Growth

BMO has maintained a dividend payout of $2.80 CDN (~$2.84 USD) per year since late 2007. Recently, BMO raised its dividend to $2.88 CDN (~$2.92 USD) per year on August 28, 2012.

Year Dividend (CDN) YOY Dividend Growth
2008 $2.80 N/A
2009 $2.80 0%
2010 $2.80 0%
2011 $2.80 0%
2012 $2.80-$2.88* 2.86%
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* Dividend increased in November 2012

Historical Yield

Due to the market crash in 2008-2009, the yield of BMO surged to 12+% when the stock price hit a low of $19.32 USD. Fortunately, since dividends were not cut, if you bought at this time you would be sporting a double-digit yield.

Year Price Range (NYSEARCA:USD) Dividend Yield Range
2008 22.56-59.08 2.629 4.45%-11.65%
2009 19.32-53.42 2.434 4.56%-12.60%
2010 47.47-65.68 2.707 4.12%-5.70%
2011 51.83-66.64 2.87 4.31%-5.54%
2012 50.95-61.74 2.83 4.58%-5.55%
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EPS Growth

EPS has been steadily growing since it made the lows in 2009.

Year EPS YOY EPS Growth


3.09 N/A
2009 2.86 -7.4%
2010 4.66 62.9%
2011 5.30 13.7%
2012 6.15 (Estimated) 16.0%
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Payout Ratio

Payout ratio has been reduced back to the target 40-50% range, even after the recent increase in dividend.

Year Dividend EPS Payout Ratio


2.629 3.09 85.1%
2009 2.434 2.86 85.1%
2010 2.707 4.66 58.1%
2011 2.87 5.30 54.2%
2012 2.83 6.15 46.0%
Click to enlarge

Technical Analysis

BMO is showing signs of over-bought with RSI hitting 67.49. It is currently well above the 30 week MA of $58.02, with a clear up-trend in its 30 week MA. There seems to be firm support at the $50 range, with a near-term support around $58. BMO is quickly approaching some resistance at $65.


BMO has steadily raised its dividend for the past 20+ years. It is one of the highest yielding banks in Canada right now, with dividends firmly supported by its strong EPS growth. I would look for a pull-back to around the $57 level which will yield around 5%, or the mid-range of yield over the past 3 years. Given the temporary "fiscal-cliff" resolution and US debt ceiling limit, there will likely be some nice buying opportunity in 2 to 3 months.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.