Dividend Yield: Bank of Montreal (TSE:BMO)

August 30th, 2010 |

Image via WikipediaWith the recent correction BMO has had. It is worth having a look at it as it is paying a good dividend yield of 4.86% from Friday’s close of 57.60$. It actually hit the low 56$ early last week. The Bank of Montreal is one of the major banks in Canada providing all the financial services that we have become used to with the Canadian banks.

Fact Sheet

Currently has the highest yield of the major Canadian banks at 4.86%.
In the last 5 years, they have raised their dividends 3 times. Their historical data for dividends on their website is poor. The last 3 years have been flat.
BMO has a market capitalization of 32.43B$ with a P/E of 12.51.
With EPS of 4.61$, only the CIBC beats it by a wide margin amongst the top 5 banks.
BMO’s 5 year average payout ratio is 50.8% with an average dividend yield of 4.5%.
They have a foothold in the US for growth in the Chicago area.

Competitors

BMO is one of the major banks in Canada and its competitor include Royal Bank (TSE:RY), Toronto Dominion (TSE:TD), Bank of Nova Scotia (TSE:BNS) and Canadian Imperial Bank of Commerce (TSE:CIBC).

Below is a comparison of the major banks and how they have been doing in the past year. BMO has actually done well and it still manages to have a good dividend yield.

Thoughts

I currently hold a position with BMO albeit a small one. I am setup with it under Computershare to DRIP with the ability to make small purchase monthly. I intend to make monthly contribution at the moment with these current prices to increase my position slowly. I expect them to start increasing their dividends once the economy gets better. Note that I also have a large position in BNS.

If you invest in mutual funds, consider BMO a mutual fund provider and as the saying goes, it’s better to invest in the mutual fund companies than buy their mutual funds. I’d be surprised to find that one of their mutual funds has beaten BMO’s performance over the past 10 or 20 years.

If you can get in at the current yield, growth and dividend growth should be rewarding. It’s not the kind of company that will provided double digit growth year over year but it is a steady business with growth.
Readers: Do you own BMO? Do you prefer a different bank and why?

Disclosure: Long BMO

Disclamer: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your decision at your own risk – see my full disclaimer for more details.