Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

BMO Financial Group Hikes Its Dividend. Good News?

Congratulations, shareholder! Did you hear the good news? From here on out, BMO Financial Group (NYSE:BMO) will be paying you a bit more money each quarter.

On Wednesday, May 27, BMO announced that its board of directors has declared an $0.82 dividend  on its common shares, up $0.02 from last quarter. This dividend will be payable on August 26, 2015, to shareholders of record on August 3, 2015.

According to , this bank has been raising its dividend steadily over the course of the past three years, and this week’s announced increase equates to a 2.5% hike in the dividend yield. If continued over the course of one full year, unchanged, BMO’s new dividend rate will amount to $3.28 per share.

BMO Financial Group attracted our attention because its top 4 hedge fund holders are all quant funds. Cliff Asness’ AQR Capital had the biggest position in BMO with a total investment of $81 million at the end of March. Renaissance Technologies, Hutchin Hill, and David Shaw’s quant hedge funds followed AQR. RenTech, which has been one of the most profitable hedge funds ever, actually doubled its BMO position during the first quarter.

Now, with BMO shares currently priced just north of $62 per share, you might ordinarily think that “$3.28 per share” would work out to a 5.2% dividend yield on the stock — but not so fast. Because BMO is a Canadian company, the $0.82 worth of dividends it will pay for this next quarter are Canadian cents . That’s only about $0.66 in American money. As a result, the bank’s new annual dividend is just US $2.63, which when weighed against the U.S. listing’s stock price results in an annual dividend yield of 4.2%.

What does it mean to you?
Knowing this, how does the stock stack up against alternative investments that you might make? Let’s put BMO in context for you, relative to the broader S&P 500 index of America’s 500 biggest stocks:

BMO Financial Group S&P 500
Dividend yield 4.2% 2.2%
Price-to-book ratio 1.4 2.6
Forward P/E ratio 8.7 18.5
Projected long-term earnings growth rate 10% 9.8%

S&P data courtesy of BMO data courtesy of Yahoo! Finance.

While investors would certainly prefer to be paid 5.2% in dividends for every share of BMO they own, rather than the 4.2% dividend yield they can now expect, the news isn’t all bad. Relative to the average S&P 500 offering, BMO costs less on both a P/E and a P/B basis, is growing somewhat faster than average, and pays a dividend yield nearly twice that of the S&P.

All things considered, the stock still looks pretty attractive.


This $19 trillion industry could destroy the Internet
One bleeding-edge technology is about to put the World Wide Web to bed. And if you act quickly, you could be among the savvy investors who enjoy the profits from this stunning change. Experts are calling it the single largest business opportunity in the history of capitalism… The Economist is calling it “transformative”… But you’ll probably just call it “how I made my millions.” Don’t be too late to the party — click here for one stock to own when the Web goes dark.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.