Bank of Montreal (TSX:BMO) stock has been on a strong run over the past year, up nearly 39% from its 52-week low. Investors looking at it in August 2025 are likely wondering if there’s still upside left, or if the easy gains have already been made. The bank posted solid earnings, increased its dividend, and bought back shares, but credit losses are also creeping higher. That makes this stock a bit more of a balancing act than it might look on the surface. So let’s dive deeper.
What happened
In the latest quarter, net income came in at $1.96 billion, up from $1.87 billion a year earlier. Adjusted earnings per share (EPS) hit $2.62, slightly above last year’s $2.59. Revenue grew almost 5% year-over-year, with gains across Canadian personal and commercial banking, U.S. banking, wealth management, and capital markets. The dividend stock also raised its quarterly dividend to $1.63 per share, a 5% increase from last year and a 3% boost from the prior quarter, giving it a forward yield of about 4.2%.
That said, the path hasn’t been all smooth. Credit provisions rose to over $1 billion in the quarter, up sharply from $705 million last year. While impaired loan provisions eased, performing loan provisions jumped due to a cautious economic outlook and some shifts in portfolio quality. Higher provisions aren’t unusual for banks in uncertain conditions, but these can pressure earnings if they persist. CEO Darryl White noted the bank is focused on rebuilding return on equity through balance sheet optimization and growth investments, suggesting management sees room to improve efficiency and profitability.
Considerations
BMO’s Canadian operations saw a 6% revenue boost, but higher expenses and provisions weighed on net income, which fell 10% year-over-year. In the U.S., results were more mixed. The stronger U.S. dollar helped adjusted earnings inch up, but in constant currency terms, profits dipped 4%, partly due to the sale of a credit card portfolio as part of balance sheet cleanup. Wealth management was a bright spot, with net income up 13% thanks to stronger markets and higher net interest income. Capital markets revenue held up well, though higher costs and credit provisions trimmed earnings there, too.
From a valuation perspective, the dividend stock trades at about 11.9 times forward earnings, which is reasonable for a large Canadian bank with stable earnings and a strong dividend record. Its Common Equity Tier 1 ratio sits at 13.5%, giving it solid capital buffers even after share repurchases. The payout ratio is a manageable 58%, leaving room for future dividend growth if earnings keep pace. Still, the rising credit provisions are a reminder that even big, well-capitalized banks aren’t immune to economic shifts.
Foolish takeaway
Looking ahead, investors will want to watch three things: whether BMO can keep growing revenue without letting expenses creep too high, how credit quality trends evolve in a softening economic environment, and whether management continues to prioritize shareholder returns through dividends and buybacks. If the Canadian and U.S. economies hold up better than expected, BMO’s diversified earnings base could support steady growth. But if credit losses climb faster than anticipated, that could take some shine off the story.
In August 2025, BMO is neither a screaming bargain nor overpriced. It’s a dividend stock with strong fundamentals, a solid dividend, and management committed to shareholder value, but also with some near-term credit quality headwinds. For income investors, the 4%-plus yield and recent dividend hike make it an attractive hold. For growth-focused buyers, it may be worth watching for a pullback before adding more. Either way, this is a name built for patient investors who can ride out the occasional bump in the road.
