Thursday, December 15, 2011

Bank of Montreal

I own this stock (TSX-BMO). This was the first bank stock that I bought. I bought it back in 1983. I have only been tracking it on Quicken since 1987. Since I have been tracking it, I have made a total return of 16% per year. Of this return, my dividends payments were 7.5% per year. On my original stock price, I am making a 19.3% return on Dividends.

The Bank of Montreal has not raised their dividends since 2008. They seem to be the last of the banks to delay dividend increases. I see no news on when they might raise the dividends. They used to have a very good record of dividend increases. The 10 year growth in dividends is still not bad, but the 5 year one is low because of no recent dividend increases. The 5 and 10 year growth in dividends is 4.4% and 9.6% per year, respectively.

The Dividend Payout Ratio for earnings in 2011 was 53%. However, traditionally the DPR for earnings has been in the 30% and 40% range. Since the DPR for earnings is expected to be around 37% next year, maybe there is hope for a dividend raise soon. On the other hand, the problems in Europe are bound to affect us, so maybe not.

Over the past 5 years there has been minimal growth in both revenues and earnings. The 5 year growth for both these items is around 1% per year. The 10 year growth in earnings at around 7% per year is in the ok range. However, the 10 year growth in revenue is also in the 1% per year range and therefore a very low range.

There has not been much increase in cash flow for this bank either. However, cash flow for banks tends to be all over the place and it often hard to tell if there is any cash flow growth. The 5 and 10 year growth in book value is ok, but a bit low at 6% and 7% per year, over the past 5 and 10 years.

The Return on Equity is good for 2011 at 13%. The 5 year median ROE is also 13%. The ROE has always been quite good for BMO.

The last thing to talk about is the debt ratios. The Liquidity Ratio is meaningless for banks, so I do not track this. The Asset/Liability Ratio for BMO is low at 1.06, but this is in the normal range for banks. The Leverage and Debt/Equity Ratios might seem high at 18.9 and 17.79, but these are rather normal for banks. All these ratios are lower than the 5 year median ratios. The 5 year median Ratio for the A/L Ratio is 1.05. The 5 year median Leverage and Debt/Equity Ratios were at 22.27 and 21.23.

This bank does not seem to be doing as good as other banks are currently. If I were buying a bank today, I probably would not buy this one. I would probably go for Bank of Nova Scotia instead. I also own Royal Bank and TD bank.

BMO is a bank. They offer personal and corporate banking and wealth management services in Canada and US, which includes looking after banking, financing, investing, credit card and insurance needs. They offer mortgages and mutual funds and they offer full service and on-line brokerage services. They are international bank having banking in Canada and US. They have clients, corporate, institutional and governmental, in UK, Europe, Asia and South America. Its web site is here Canada Bread. See my spreadsheet at bmo.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

1 comment:

  1. Susan, I will be starting a DRIP for BMO in January 2012. My goal is to add at least one share per month, as well as the other stocks I will be DRIPping. I think BMO is a great buy right now, but I see more downward potential on all the Canadian Banks for 2012.

    Dividend Ninja