Sound bite for Twitter and StockTwits is: Dividend Growth Financial. Results of stock price testing is that the stock price is probably reasonable. Debt Ratios are good. The Dividend Payout Ratios (DPR) needs to move lower. The current dividend yield is moderate with dividend growth moderate. See my spreadsheet on Bank of Montreal.
Is it a good company at a reasonable price? This is my annual review of a stock I own and is one of my Backbone stocks. This stock has not slowed down as Metro has, but stock price growth and dividend growth has varied over time. This is typical. With Metro, people always must buy food. Most other companies have volatility and this is not surprising. I will be keeping my stocks in the bank. I will not buy anymore because I have enough. Currently the stock price is testing as reasonable.
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 on this stock. I bought this stock in 1983. Since then, I have made 10.33% per year in capital gains. If my dividends are the same as from 1987 then my total return 17.08% per year. For my Trading and Pension accounts under this stock, according to Quicken, I have made a total return of 15.15% per year with 8.83% from Capital Gains and 6.77% from dividends. Quicken covers my stock from 1987. I sold 100 shares in 2010 and purchased more in 2008 and 2013.
Banks are different from other stocks, at least Canadian Banks are, in that you can get a moderate dividend yield (2% to 4% ranges) and still get good dividend increases.
If you had invested in this company in December 2014, for $1,068.34 you would have bought 17 shares at $82.18 per share. In December 2024, after 10 years you would have received $560.69 in dividends. The stock would be worth $1,704.43. Your total return would have been $2,256.12. This would be a total return of 8.92% per year with 4.75% from capital gain and 4.14% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $82.18 | $1,068.34 | 17 | 10 | $560.69 | $1,704.43 | $2,265.12 |
The current dividend yield is moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 4.46%. The 5, 10 and historical dividend yields are also moderate at 4.74%, 4.21% and 4.47%. The dividend growth is moderate (8% to 14% ranges) at 8.7% per year for the past 5 years. The last dividend increase was in 2024 and it was for 2.65%. However, note that this bank tends to raise dividends at least twice in a year. The reason for the high 5 year increase was the dividend increase in 2022 of just over 20% after no increase in 2021.
The Dividend Payout Ratios (DPR) needs to move lower. The DPR for 2023 for Earnings per Share (EPS) is too high at 64% with 5 year coverage good at 47%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is too high at 62% with 5 year coverage good at 47%. The DPR for 2023 for Cash Flow per Share (CFPS) is too high at 46% with 5 year coverage at 67%. The DPR for 2023 for Free Cash Flow (FCF) is good at 34% with 5 year coverage at 13%. But again, there is no agreement on what the FCF is.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 63.51% | 46.62% |
| AEPS | 62.40% | 47.42% |
| CFPS | 45.71% | 68.93% |
| FCF | 33.74% | 12.62% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2023 is at 10.63 and currently at 10.63. However, we need also to look at the Long Term Debt/Covering Assets Ratio for 2024 which is good at 0.87 and currently at 0.87 because this is a more important one for a Financial. The Liquidity Ratio for 2023 is good at 3.77 and 3.77 currently. However, this is not an important one for Financials. The Debt Ratio for 2023 is good for a financial at 1.06 and 1.06 currently. The bank says that their leverage is 4.40.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R A | 0.87 | 0.87 |
| Lg Term R | 10.63 | 10.63 |
| Intang/GW | 0.23 | 0.21 |
| Liquidity | 3.77 | 3.77 |
| Liq. + CF | 5.12 | 5.11 |
| Debt Ratio | 1.06 | 1.06 |
| Leverage Bk | 4.40 | 4.40 |
| Leverage | 16.72 | 16.72 |
| D/E Ratio | 15.72 | 15.72 |
The Total Return per year is shown below for years of 5 to 41 to the end of 2024. 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. |
|---|---|---|---|---|---|
| 2019 | 5 | 8.65% | 11.12% | 6.76% | 4.36% |
| 2014 | 10 | 7.11% | 9.47% | 5.44% | 4.03% |
| 2009 | 15 | 5.26% | 10.66% | 6.30% | 4.36% |
| 2004 | 20 | 6.90% | 8.32% | 4.51% | 3.81% |
| 1999 | 25 | 7.79% | 12.12% | 7.18% | 4.94% |
| 1994 | 30 | 8.06% | 13.79% | 8.22% | 5.57% |
| 1989 | 35 | 7.20% | 14.27% | 8.46% | 5.81% |
| 1984 | 40 | 6.48% | 14.51% | 8.33% | 6.18% |
| 1983 | 41 | 6.32% | 12.85% | 7.62% | 5.23% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 7.45, 10.64 and 13.83. The corresponding 10 year ratios are 10.06, 11.23 and 12.69. The corresponding historical ratios are 10.26, 11.12 and 14.54. The current ratio is 13.15 based on a stock price of $139.10 and EPS estimate for 2025 of $10.58. This 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.91, 10.28 and 11.65. The corresponding 10 year ratios are 9.20, 10.35 and 11.63. The current ratio is 12.76 based on a AEPS estimate for 2025 of $10.90 and a stock price of $139.10. This ratio is above the high ratios of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $160.05. The 10-year low, median, and high median Price/Graham Price Ratios are 0.70, 0.79 and 0.88. The current ratio is 0.87 based on a stock price of $139.10. This ratio is between the median and high ratios 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 10-year median Price/Book Value per Share Ratio of 1.34. The current ratio is 1.33 based on a stock price of $139.10, Book Value of $76,199M and Book Value per Share of $104.45. The current ratio is .6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have a Book Value per Share of $108.70. This implies a ratio of 1.28 based on a stock price of $139.10 and Book Value of $79,300. This ratio is 4% 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 3.11. The current ratio is 3.50 based on a Cash Flow for the last 12 months of $29,030M, Cash Flow per Share of $39.79 and a stock price of $139.10. The current ratio is 12% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 4.47%. The current dividend yield is 4.46% based on a stock price of $139.10 and dividends of $6.20. The current ratio is 0.3% 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 4.21%. The current dividend yield is 4.46% based on a stock price of $139.10 and dividends of $6.20. The current ratio is 6% 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 2.56. The current ratio is 2.83 based on Revenue estimate for 2025 of $34,633M, Revenue per Share of $47.47 and a stock price of $139.10. The current ratio is 14% 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 10 year dividend yield test is saying that the stock price is reasonable and below the median. The P/S Ratio test is also saying that the stock price is reasonable, but above the median. Most of the rest of the testing is the same.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4), and Hold (7). The consensus is a Buy. The 12 month stock price consensus is $143.94, with a high of $160.24 and low of $126.00. The consensus stock price of $ 143.94 implies a total return of 7.94% with 3.48% from capital gains and $4.76% from dividends.
Lots of analysts on Stock Chase thinks this is a buy. Some concerns are the state of the Canadian economy and the current price of this stock. Stock Chase gives this stock 5 stars out of 5. Andrew Walker on Motley Fool says that the stock pays a good dividend and it should continue to grow. Amy Legate-Wolfe on Motley Fool reviews all Canadian Banks, including this one. The company put out a press release via Newswire about their fourth quarter of 2024.
Zack Equity Research via Yahoo Finance reviews this stock and it fourth quarter results. Simply Wall Street via Yahoo Finance reviews this stock and its dividend. Simply Wall Street gives this stock 2 and one half stars out of 5. Simply Wall Street has no warnings out 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, US 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 Monday, January 6, 2025 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.
Also, on my book blog I have put a review of the book The Fourth Turning by William Strauss and Neil Howelearn more...
