Is it a good company at a reasonable price? The banks in Canada have been good providers of dividend income. Over the years they have grown a lot in Canada by taking over Trust companies, Brokers, and Insurance companies. Now to grow they must go international which they have done over the past number of years. I do not think the future growth in Canadian banks will be as good as in the past and also international banking is more volatile than it is in Canada. However, I do expect Canadian Banks to continue to reasonably well and I am holding on to all my Canadian bank stocks. This stock is currently selling at a reasonable price.
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 I have done well with this stock since I bought it in 1983. I use Quicken to help keep track of my investments and I only have this stock in Quicken since 1987m a 36 year period. I bought more stock in 2008 and 2013. I have made 15.22% per year with 8.59% from capital gains and 6.63% from dividends. The dividends received have paid for this stock by 311%.
If you had invested in this company in December 2013, for $1,062.15 you would have bought 17 shares at $70.81 per share. In December 2023, after 10 years you would have received $601.95 in dividends. The stock would be worth $1,966.65. Your total return would have been $2,568.60. This is a total return would be a total return of 10.57% per year with 6.35% from capital gain and 4.21% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $70.81 | $1,062.15 | 17 | 10 | $601.95 | $1,966.65 | $2,568.60 |
If you had invested in this company in December 1993, for $1,008.31 you would have bought 73 shares at $13.81 per share. In December 2023, after 30 years you would have received $5,450.55 in dividends. The stock would be worth $9,571.03. Your total return would have been $15,021.58. This is a total return would be a total return of 12.85% per year with 7.79% from capital gain and 5.06% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $13.81 | $1,008.31 | 73 | 30 | $5,450.55 | $9,571.03 | $15,021.58 |
The current dividend yield is moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 4.67%. The 5, 10 and historical dividend yields are also moderate at 4.14%, 4.12% and 4.46%. The dividend growth is currently moderate (8% to 14% ranges) at 9% per year over the past 5 years. The most recent dividend increase occurred in 2023 and it was for 2.7%. However, this bank generally raises dividend several times in each year. Last dividends were raised 3 times.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is too high at 101% but is good at 5 year coverage at 44%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 11% with 5 year coverage at 43%. The DPR for 2023 for Cash Flow per Share (CFPS) is too high at 87% with 5 year coverage is still too high at 57% as I prefer this to be 40% or less. The DPR for 2023 for Free Cash Flow (FCF) is good at 34% with 5 year coverage at 10%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 100.70% | 43.53% |
| AEPS | 11.19% | 43.40% |
| CFPS | 86.74% | 57.31% |
| FCF | 34.17% | 10.20% |
Debt Ratios are fine. The Long Term Debt/Covering Assets Ratio for 2023 is fine at 0.86 and currently at 0.86. The Long Term Debt/Market Cap Ratio is not important for banks. The Liquidity Ratio for 2023 is good at 4.74 and 4.74 currently, but this is not important for banks. The Debt Ratio for 2023 is fine at 1.06 and 1.06 currently for a bank. The Leverage is determined differently for banks.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R A | 0.86 | 0.86 |
| Lg Term R | 12.04 | 12.04 |
| Intang/GW | 0.29 | 0.23 |
| Liquidity | 4.74 | 4.74 |
| Liq. + CF | 5.05 | 5.04 |
| Debt Ratio | 1.06 | 1.06 |
The Total Return per year is shown below for years of 5 to 40 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 8.99% | 12.44% | 8.01% | 4.43% |
| 2013 | 10 | 6.96% | 10.57% | 6.35% | 4.21% |
| 2008 | 15 | 4.88% | 16.24% | 10.03% | 6.21% |
| 2003 | 20 | 7.53% | 8.40% | 4.58% | 3.82% |
| 1998 | 25 | 7.77% | 10.06% | 5.96% | 4.10% |
| 1993 | 30 | 8.09% | 12.85% | 7.79% | 5.06% |
| 1988 | 35 | 7.21% | 14.87% | 8.73% | 6.14% |
| 1983 | 40 | 6.34% | 12.86% | 7.65% | 5.22% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 7.45, 10.64 and 12.28. The corresponding 10 year ratios are 10.06, 11.23 and 12.69. The corresponding historical ratios are 6.17, 11.11 and 14.54. The current P/E Ratio is 11.75 based on a stock price of $129.37 and EPS estimate for 2024 of $11.01. The current ratio is between the median and high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have Adjusted Earnings per Share (AEPS) Data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.91, 10.22 and 11.28. The corresponding 10 year ratios are 9.20, 10.35 and 11.63. The current P/E Ratio is 10.70 based on a stock price of $129.37 and AEPS estimate for 2024 of $12.09. The current ratio is between the median and high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $162.61. The 10-year low, median, and high median Price/Graham Price Ratios are 0.70, 0.88 and 0.79. The current P/GP Ratio is 0.80 based on a stock price of $129.37. The current ratio is between the low and median ratios of the 10 year median ratios. 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 1.35. The current P/B Ratio is 1.33 based on a stock price of $129.37, Book Value of $70,079M and Book Value per Share of $97.21. The current ratio is 2% below the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share estimate for 2024 of $103.00. This implies a ratio of 1.26 with a stock price of $129.37 and Book Value of $74,254M. This ratio is 7% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 2.67. The current ratio is 9.72 based on Cash Flow for the last 12 months of $9,591M, Cash Flow per Share of $13.30 and a stock price of $129.37. The current ratio is 264% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. However, most analysts dismiss the Cash Flow for banks because it tends to be quite volatile.
I get an historical median dividend yield of 4.46%. The current dividend yield is 4.67% based on dividends of $6.04 and a stock price of $129.37. The current ratio is 5% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 4.12%. The current dividend yield is 4.67% based on dividends of $6.04 and a stock price of $129.37. The current ratio is 13% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is P/S Ratio is 2.56. The current P/S Ratio is 2.75 based on a stock price of $129.37, Revenue estimate for 2024 of $33,872M and Revenue per Share of $46.99. The current P/S Ratio is 8% 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. The dividend yield tests say that the stock is reasonable and below the median. The P/S Ratio test says that the stock is reasonable but above the median. Most of the rest of the testing says that the stock is reasonable and above or below the median.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (7), Hold (2) and Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $130.42 with a high of $145.00 and low of $107.00. The consensus price of $130.42 implies a total return of 5.48% with 0.81% from capital gains and 4.67% from dividends.
Analysts on Stock Chase like this bank. Stock Chase gives this bank 5 stars out of 5. It is on all the dividend lists I follow. Andrew Walker on Motley Fool thinks that bank stocks may give up their recent gains. Amy Legate-Wolfe on Motley Fool thinks banks stock offer secure dividends and BMO is one bank she recommends. The bank put out a press release on Newswire about their 2023 year end results. Simply Wall Street has 3 warnings on this stock of profit margins (13.9%) are lower than last year (39.9%); shareholders have been diluted in the past year; and dividend of 4.61% is either not well covered by earnings currently or not forecast to be covered. Simply Wall Street gives this stock 3 and one half stars out of 5.
Simply Wall Street via Yahoo Finance put out a report on this stock.
Bank of Montreal is a diversified financial-services provider based in North America, operating four business segments: Canadian personal and commercial banking, U.S. P&C banking, wealth management, and capital markets. The bank's operations are primarily in Canada, with a material portion also in 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 Friday, January 5, 2024 around 5 pm. Tomorrow on my other blog I will write about Something to Buy January 2024 .... learn more on Thursday, January 4, 2024 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.
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