I own this stock of Bank of Montreal (TSX-BMO, NYSE-BMO). I made two investments in this bank, one in 1987 and one in 2008. My total return to the end of 2019 is 15.42% per year with 8.86% per year from capital gains and 6.56% per year from dividends. On the stock I bought in 1987, I am making a yield of 55.9% on the original purchase price. For the stock I bought in 2008, I am making 7.09% on the original purchase price.
When I was updating my spreadsheet, I noticed Total Return has not been as good in the last 15 year as it was for longer terms. See chart below. The stock price was reality high in 15 years ago in 2004. It is not always possible to get a cheap price, but we should try for a reasonable price for stock when we buy.
The dividend yield is generally in the moderate range (2% to 4% range). The current dividend 4.10%, with the 5, 10 and historical yields at 4.14%, 4.29% and 4.46%. As you can see from the table below, I have data on this stock going back some 36 years. The dividend growth is in the low range (below 8%). See chart below.
The Dividend Payout Ratios are good. The DPR for EPS for 2019 is 46% with 5 year coverage at 47%. The DPR for CFPS for 2019 is 23% with 5 year coverage at 40%. The DPR for Free Cash Flow is 29% for 2019 with 5 year coverage ag 30%. The 5 year coverage ratio for FCF is 3.30 and I understand that a ratio of 2.50 or higher is good.
Debt Ratios are fine. Since this is a financial you do not compare the debt to the market cap, but look at Asset Coverage of the debt. The Debt/Covering Assets Ratio for 2019 is 0.85. For financials, the Liquidity Ratio is not important. The Debt Ratio of 1.06 is fine for a financial. Leverage and Debt/Equity Ratio for 2019 are 16.68 and 15.68 are rather normal for a financial.
The Total Return per year is shown below for years of 5 to 36 to the end of 2019. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | 5.59% | 8.12% | 4.14% | 3.98% |
| 2009 | 10 | 3.61% | 10.49% | 6.07% | 4.42% |
| 2004 | 15 | 6.33% | 7.68% | 3.77% | 3.91% |
| 1999 | 20 | 7.58% | 12.26% | 7.29% | 4.97% |
| 1994 | 25 | 7.95% | 14.03% | 8.51% | 5.52% |
| 1989 | 30 | 6.96% | 14.47% | 8.75% | 5.72% |
| 1984 | 35 | 6.17% | 14.66% | 8.56% | 6.10% |
| 1983 | 36 | 6.00% | 12.93% | 7.74% | 5.19% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.07, 11.33 and 12.61. The corresponding 10 year ratios are 10.17, 11.34 and 12.44. The corresponding historical ratios are 10.51, 11.42 and 13.50. The current P/E Ratio is 10.42 based on a stock price of $100.46 and 2020 EPS estimate of $9.64. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $124.56. The 10 year low, median, and high median Price/Graham Price Ratios are 0.75, 0.83 and 0.93. The current P/GP Ratio is 0.81 based on a stock price of $100.46. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.45. The current P/B Ratio is 1.40 based on a stock price of $100.46, Book Value of $45,728M, and a Book Value per Share of $71.54. The current ratio is 3% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 4.46%. The current dividend yield is 4.10% based on a stock price of $100.46 and dividends of $4.12. The current yield is 8% below the current 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 2.56. The current P/S Ratio is 2.70 based on 2020 Revenue estimate of $23,749M, Revenue per Share of $37.15 and a stock price of $100.46. The current ratio is 6% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. Both the P/S Ratio test and the dividend yield test show that the stock price is reasonable but above the median. The others are showing the stock price below the median.
Is it a good company at a reasonable price? For most of the durations of total return I looked at, it was above 8%. A total return of 8% is a good total return over a long term. The exception was the 15 year term which started in 2004. In 2004, most of the dividend yields were in the 2% range. The P/E Ratio was 13.09. So, 2004 would not have been a good year to buy this stock. All Canadian Banks seem to be good stocks to hold.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (5), Hold (5), Underperform (1) and Sell (1). The consensus would be a Buy, but the recommendations are all over the place. The 12 month stock price is $111.25. This implies a total return of 14.84% with 10.74% from capital gains and 4.10% from dividends.
See what analysts are saying on Stock Chase. Seems this is not a favourite Canadian Bank. Adam Othman on Motley Fool talks about this bank paying dividends for the last 190 years. A writer on Simply Wall Street says the bank is trading at a fair value. A writer on Simply Wall Street says the EPS is growing faster than the stock price so he concludes that the broader market is cautious about this stock. .
Bank of Montreal is a diversified financial-services provider based in North America, operating four business segments: Canadian P&C banking, U.S. P&C banking, wealth management, and capital markets. The bank's operations are primarily in Canada, with a material portion also within the U.S. 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 January 6. 2020 around 5 pm.
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. 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 website for stocks followed and investment notes. 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 or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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