All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Bank of Montreal in Focus
Bank of Montreal (BMO - Free Report) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of -7.43% since the start of the year. The bank is currently shelling out a dividend of $1.06 per share, with a dividend yield of 4.27%. This compares to the Banks - Foreign industry's yield of 4.35% and the S&P 500's yield of 1.62%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.25 is up 25.9% from last year. In the past five-year period, Bank of Montreal has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.93%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Bank of Montreal's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
BMO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $10.44 per share, with earnings expected to increase 1.26% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BMO is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.2% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Bank of Montreal in Focus
Bank of Montreal (BMO - Free Report) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of -7.43% since the start of the year. The bank is currently shelling out a dividend of $1.06 per share, with a dividend yield of 4.27%. This compares to the Banks - Foreign industry's yield of 4.35% and the S&P 500's yield of 1.62%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.25 is up 25.9% from last year. In the past five-year period, Bank of Montreal has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.93%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Bank of Montreal's payout ratio is 38%, which means it paid out 38% of its trailing 12-month EPS as dividend.
BMO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $10.44 per share, with earnings expected to increase 1.26% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BMO is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.2% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>
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