Bank of Montreal (BMO) Dividend Boosted 2.38% For August 2016 Payout

Earnings from Bank of Montreal (BMO) which were announced this morning before the markets opened, met expectations. Bank of Montreal is the first Canadian Bank to report earnings for the quarter and often sets the outlook for all the major Canadian Banks.

All prices, charts and financial details are in Canadian dollars from the TSX Composite Index.

Bank of Montreal Stock (BMO) Up 1.25%

Bank of Montreal Stock rose 1.25% to a high of $84.55 in the morning marking a new 52 week high for the bank stock. Bank of Montreal also announced an increase of 2.38% in their annual dividend which now stands at $3.44. Basically investors buying shares today will earn $34.40 in dividend payouts over the next 10 years even if the bank were to never increases its dividend again. At $3.44 the Bank of Montreal Dividend yields 4% at it all-time high today of $84.55.

Loan Loss Provisions – Less Than Expected

Analysts were anticipating $260 million of new loan loss provisions for the quarter due to the ongoing oil and gas sector declines. Instead the bank increased their loan losses by $210 million. Bank of Montreal did indicate that “bad loans” more than doubled to $410 million from $162 million during the second quarter which ended April 30. Despite this the bank remains confident their loan loss provisions will be more than adequate at the present time. As far as the balance sheet, loans to the energy sector were only 2 percent of Bank of Montreal’s credit portfolio with energy sector companies in Alberta accounting for just 6 percent of the total loans made.

BMO Net Income Down 3%

For the quarter, BMO net income for the second quarter was down 3% to $973 million. BMO took a $132 million charge for cost cuts and the introduction of new technology. Earnings were $1.73 a share which included a write-down of 12 cents on an equity investment. Analysts on average had expected $1.75 a share.

Bank of Montreal Stock Analysis to May 25 2016

Following their earnings results the stock moved higher. Much of the movement was on the back of lower than expected loan loss provisions along with the dividend increase announcement.

The stock made a double low bottom in January and again February both times bouncing off the $70 support level. The stock since February has gained 20.7%.

The Slow Stochastic still has an up signal on the stock but is showing the stock as overbought.

The Ultimate Oscillator is in agreement as it too shows the stock as very overbought.

Momentum is up for the stock. However despite a strong reading of 104.11 from momentum, overall the stock move up may not hold as momentum has been stronger in the two prior moves higher, as is evident in the chart below.

Bank of Montreal Stock Analysis to May 25 2016

Bank of Montreal Stock Trades For 2016

I have done a number of trades in Bank of Montreal Stock this year.

In January and February Bank of Montreal stock made a double bottom off the $70 support level. I bought shares on Feb 2 paying $70.88 using my Bollinger Bands Strategy Trade method.

I sold those shares on March 22 for $78.95 as I felt the rally over and the stock was going to turn lower. That was actually not the case and the stock turned sideways.

Using the same Bollinger Bands Strategy Trade I entered a new trade on April 8 and bought back the shares in Bank of Montreal Stock for $77.90. I sold those shares this morning for $84.48.

Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.