These bank dividends still look solid

Article Excerpt

Accounting rules are forcing these two banks to set aside more funds for potential loan defaults in the current high interest rate environment. While that has hurt their earnings and pushed up their dividend payout ratios, savings from recent cost cuts should improve those ratios over the next year or two. BANK OF MONTREAL $127 is a buy. The bank (Toronto symbol BMO; Income-Growth Dividend Payer Portfolio, Finance sector; Shares outstanding: 725.5 million; Market cap: $92.1 billion; Dividend yield: 4.8%; Dividend Sustainability Rating: Highest; www.bmo.com) raised your quarterly dividend with the January 2024 payment by 2.7%, to $1.51 a share from $1.47. The new annual rate of $6.04 yields a high 4.8%. Bank of Montreal aims to pay out between 40% and 50% of its earnings before unusual items as dividends. In the fiscal year ended October 31, 2023, the payout ratio was 49.4%. The bank completed its $13.8 billion U.S. Bank of the West acquisition on February 1, 2023. So far, it has found annual cost…