Tuesday, December 6, 2016

Dividend Increase

        What happened Tuesday Dec 6, prior to the markets opening?  One of Canada's big 5 banks released its 4th quarter earnings.  This bank was Bank of Montreal, whose ticker symbol is BMO.  BMO trades on both the Toronto Stock Exchange and the New York Exchange.  Some of the highlights are as follows:

  • 4th quarter earnings of C  $1.40 billion  vs C 1.26 billion in 2015
  • Earnings growth of 11.1%  year over year
  • Q4 EPS C $2.10 vs EPS C$1.90 in Q4 of 2015
  • EPS Growth 10.5% year over year
  • Q4 Revenue C $5.28 billion vs C $4.98 billion in 2015
  • Revenue Growth 6.0% year over year

Note:  C in the bullet section stands for Canadian as in Canadian dollars
   Bank of Montreal's board of directors feel good going forward and decided to raised the dividend by $0.08 per year per share.  The annual dividend was raised from $3.44 per share to $3.52 per share.  This represents a 2.33% increase.  This does not seem good at first.  But the Canadian banks of been raising the dividend twice a year. The Feb 2016 dividend payment was $0.84 per share, which corresponds to an annual dividend rate of $ 3.36 per share. The dividend was then raised $0.02 per quarter per share for the Aug 2016 payment.  Therefore as you can see the annual dividend was raised from $3.36 per share to $3.52 per share.  This represents an effective increase of 4.76% over 4 quarters.

    A 4.76% increase over 4 quarters does not seem much.  Considering the unemployment rate in Alberta due to low oil prices, this increase is more than welcome.

    Currently, I own 35 shares of BMO which was purchased on the Toronto Stock Exchange. Therefore with this $0.08 per year increase, my forward annual dividend income is increase by $2.80.   This $2.80 is equivalent to investing $80 of my own money at a 3.5% yield. But I did not have to invest any of my money and got this $2.80 per year increase in my annual dividend income.  I get this increase to my annual dividend income for just being a shareholder in Bank of Montreal.

Note:  The annual dividend rate for BMO has been updated on the Investment Tab spread sheet

Disclosure:  Long BMO

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

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