Is it a good company at a reasonable price? All the Canadian Banks have done well over the years, including this one. I like dividend growth stocks that provide over the long term at least 8% per year from capital gains and dividends. I would use caution in buying this stock at this time because it is at an all time high. It is always best to buy stocks over several years and in different months. Most of the testing I am doing on this stock is showing that the stock price is relatively expensive.
I own this stock of Bank of Montreal (TSX-BMO, NYSE-BMO). When I bought this stock in 1983, I thought it was the best bank stock to buy at that time.
When I was updating my spreadsheet, I noticed that I have done well with this bank. I have had the stock since 1983, but I only have had it on Quicken from 1987. Since 1987 and with further purchases in 2008 and 2013, I see that I have made a total return per year of 15.35% with 9.07% from capital gains and 6.28% from dividends. On my original purchase in 1983, I have a dividend yield of 88.5% and from my purchase in 2008, I have a dividend yield of 11.2%.
If you had invested in this company in December 2015, for $1,015.04 you would have bought 17 shares at $78.08 per share. In December 2025, after 10 years you would have received $601.51 in dividends. The stock would be worth $2,317.25. Your total return would have been $2,918.76. This would be a total return of 12.61% per year with 8.60% from capital gain and 4.01% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $78.08 | $1,015.04 | 17 | 10 | $601.51 | $2,317.25 | $2,918.76 |
The current dividend yield is moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 3.61%. The 5, 10 year and historical median dividend yields are also moderate at 4.15, 4.15, 4.46%. The dividend growth for this last 5 years has been moderate (8% to 14% ranges per year) at 8.6% per year. The last dividend increase was in 2025 and it was for 2.5%. Note that this bank tends to raise their dividend 2 or 3 times each year.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2024 for Earnings per Share (EPS) is fine at 56% with 5 year coverage good at 47%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is fine at 52% with 5 year coverage good at 47%. The DPR for 2024 for Cash Flow per Share (CFPS) is good at 41% with 5 year coverage high at 66%. The DPR for 2024 for Free Cash Flow (FCF) is good at 13% with 5 year coverage at 14%. I could find only one site giving the FCF for 2024 and it was at $37,657M.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 55.59% | 47.20% |
| AEPS | 52.30% | 46.96% |
| CFPS | 40.90% | 65.94% |
| FCF | 13.36% | 14.40% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2025 is fine at 7.90 and currently at 7.90. However, we need also to look at the Long Term Debt/Covering Assets Ratio for 2025 which is good at 0.83 and currently at 0.83 because this is a more important ratio for a financial. The Liquidity Ratio for 2025 is good at 3.89 and 3.89 currently. This is not an important ratio for a bank. If you added in Cash Flow after dividends, the ratios are fine at 1.53 and currently at 1.76. The Debt Ratio for 2025 is good at 1.06 and 1.06 currently because this is a bank. The Leverage Ratio for 2025 are good at 4.3% and currently at 4.3%.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R A | 0.83 | 0.83 |
| Lg Term R | 7.90 | 7.9 |
| Intang/GW | 0.24 | 0.23 |
| Liquidity | 3.89 | 3.89 |
| Liq. + CF | 4.21 | 4.21 |
| Debt Ratio | 1.06 | 1.06 |
| Leverage Bk | 4.3% | 4.3% |
The Total Return per year is shown below for years of 5 to 42 to the end of 2025. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2020 | 5 | 8.60% | 17.41% | 12.99% | 4.42% |
| 2015 | 10 | 7.04% | 12.61% | 8.60% | 4.00% |
| 2010 | 15 | 5.62% | 11.91% | 7.84% | 4.08% |
| 2005 | 20 | 6.37% | 9.45% | 5.79% | 3.66% |
| 2000 | 25 | 7.68% | 9.89% | 6.23% | 3.66% |
| 1995 | 30 | 7.93% | 13.45% | 8.48% | 4.96% |
| 1990 | 35 | 7.36% | 15.78% | 9.57% | 6.21% |
| 1985 | 40 | 6.62% | 12.37% | 7.87% | 4.50% |
| 1983 | 42 | 6.29% | 13.00% | 8.06% | 4.94% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 10.88, 12.51, and 13.99. The corresponding 10 year ratios are 10.16, 11.23 and 12.84. The corresponding historical ratios are 10.26, 11.12 and 12.17. The current ratio is 13.98 based on a stock price of $184.83 and EPS of $13.22. The current ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 9.02, 10.28 and 11.65. The corresponding 10 year ratios are 9.20, 10.35 and 11.63. The corresponding historical ratios are 9.32, 10.72 and 12.04. The current ratio is 13.61 based on a stock price of $184.83 and EPS of $13.58. The current ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $185.71. The 10-year low, median, and high median Price/Graham Price Ratios are 0.70, 0.79 and 0.88. The current ratio is 1.00 based on a stock price of $184.83. The current ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Book Value per Share Ratio of 1.35. The current P/B Ratio is 1.64 based on a Book Value of $80,013M, Book Value per Share of $112.87 and a stock price of $184.83. The current ratio is 21% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share estimate of $115.70 for 2026. This implies a ratio of 1.60 based on a stock price of $184.83 and Book Value of $82,020M. This ratio is 18% above the 10 year median ratio of 1.35. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 3.11. The current ratio is 12.80 based on the cash flow for the last 12 months of $10,240M, Cash Flow per Share of $14.44 and a stock price of $184.83. This ratio is 311% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 4.46%. The current dividend yield is 3.61% based on dividends of $6.68 and a stock price of $184.83. The current dividend yield is 19% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 4.15%. The current dividend yield is 3.61% based on dividends of $6.68 and a stock price of $184.83. The current dividend yield is 13% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is 2.62. The current ratio is 3.48 based on Revenue for 2026 of $37,631M, Revenue per Share of $53.08 and a stock price of $184.83. The current ratio is 33% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive, but might still be reasonable but at the high end of the reasonableness range. The dividend yield tests say that the stock price is reasonable but above the median. This is not confirmed by the P/S Ratio test that says the stock price is relatively expensive. Most of the rest of the tests say the stock price is expensive.
When I look at analysts’ recommendations, I find Strong Buy (2), Hold (12) and Underperform (1). The consensus is a Hold. The 12 month stock price consensus is $183.67 with a high of $201.00 and low of $170.00. The consensus stock price of $183.67 implies a total return of 2.99% with a capital loss of $0.63% and dividends of 3.61% based on a current stock price of $184.83.
A number of analysts on Stock Chase are worried that the banks are fully valued or overvalued at the present time. Demetris Afxentiou on Motley Fool likes this bank because it has a 200 year dividend record. Amy Legate-Wolfe on Motley Fool says BMO offers Big Six stability, U.S. growth exposure, prudent risk management, and a well-supported dividend. The bank put out a Press Release about their fourth quarter of 2025.
Simply Wall Street via Yahoo Finance reviews this stock. They said that it does on how you value the stock whether or not you think it is undervalues or overvalues.
Bank of Montreal is a diversified financial-services provider based in North America. BMO operates four business segments: Canadian personal and commercial banking, US personal and commercial banking, wealth management, and capital markets. The bank's operations are primarily in Canada, with a material portion also in the US. Its web site is here Bank of Montreal.
The last stock I wrote about was about was Metro Inc (TSX-MRU, OTC-MTRAF) ... learn more. The next stock I will write about will be Royal Bank of Canada (TSX-RY, NYSE-RY) ... learn more on Wednesday, January 7, 2026 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks November 2026 … learn more on Tuesday, January6, 2026 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
