If you’re searching for a Canadian dividend-growth stock that offers both stability and long-term growth potential, Bank of Montreal (TSX: BMO) deserves serious consideration. As one of Canada’s largest and most established financial institutions, BMO has built a reputation for delivering consistent returns to shareholders while navigating economic cycles with resilience. With its current valuation, strong earnings, and commitment to dividend growth, it’s a growth stock worth holding for decades.
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The numbers
BMO recently released its first-quarter earnings for fiscal 2025, and the results were nothing short of impressive. The growth stock reported net income of $2.14 billion, or $2.83 per share. A significant jump from $1.29 billion, or $1.73 per share, in the same period last year. This 35% year-over-year earnings growth reflects the strength of BMO’s core banking operations, capital markets division, and wealth management business. The capital markets segment, in particular, stood out, posting a 45% increase in adjusted earnings to $591 million. This surge was driven by a revival in deal-making and trading activities, signalling that BMO is well-positioned to benefit from improving market conditions.
Revenue for the quarter came in at $8.84 billion, reflecting the growth stock’s ability to generate consistent income across its diverse operations. However, it’s worth noting that BMO, like its peers, is preparing for potential economic headwinds. The bank set aside $1.01 billion in provisions for credit losses, up from $627 million a year earlier. This increase reflects a prudent approach to managing risk, especially as global economic uncertainties persist. While these provisions can weigh on short-term profits, they demonstrate BMO’s commitment to maintaining a strong balance sheet.
A secure dividend
One of the most appealing aspects of BMO for long-term investors is its dividend history. The bank maintained uninterrupted dividend payments for over 190 years, making it one of the most reliable income-generating stocks on the TSX. Currently, BMO offers a forward annual dividend of $6.36 per share, translating to a yield of approximately 4.45% at writing. This yield is particularly attractive in the current market, where reliable income sources can be hard to find. Moreover, BMO has a five-year average dividend yield of 4.43%, highlighting its consistency in rewarding shareholders.
Beyond dividends, BMO’s growth strategy also stands out. The bank continues to expand its presence in the United States, where its personal and commercial banking division reported earnings of $580 million this quarter, up from $560 million a year earlier. This growth underscores BMO’s success in leveraging its acquisition of Bank of the West, which has significantly strengthened its footprint south of the border. With assets under administration now at $406 billion and assets under management reaching $451 billion, BMO’s wealth management segment remains a key driver of long-term growth.
Still valuable
Despite the impressive results, BMO’s stock remains reasonably priced. The growth stock currently trades at a forward price-to-earnings (P/E) ratio of 13.05, which is attractive compared to historical averages and the broader market. Its price-to-book ratio sits at 1.26, reflecting a fair valuation for a growth stock with such strong fundamentals.
Of course, no investment is without risk. BMO, like all major banks, faces potential challenges from regulatory changes and global economic uncertainty. The looming threat of a 25% U.S. tariff on non-energy Canadian imports, set to take effect in March 2025, also creates some concern for cross-border business operations. However, BMO’s diversified business model, strong capital position, and conservative risk management approach should help it weather any short-term storms — all while continuing to deliver value for long-term investors.
Bottom line
Ultimately, the decision to invest in any stock should align with your financial goals and risk tolerance. But for those seeking a dependable dividend-growth stock with a proven track record and solid future prospects, Bank of Montreal stands out as a smart choice. Its current valuation, robust earnings, and strong dividend yield make it a rare opportunity in today’s market — one that could reward patient investors for decades to come.
