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BMO Hikes Dividend Despite a Drop in Earnings

Bank of Montreal (TSX:BMO)(NYSE:BMO) is one of the top bank stocks in Canada, and it recently reminded investors of why that is. This month, it announced its fourth-quarter results and that it would be increasing its dividend payments.

Although earnings of $1.6 billion were down significantly from $4.5 billion in the same period last year, on an adjusted basis the difference was much smaller; adjusted EPS was $2.81 for the period ending Oct. 31 versus $3.04 a year ago.

Looking at BMO's operational segments, there were mixed performances. While some sectors like Canadian personal and commercial banking showed growth, others like wealth management experienced a downturn. However, the bank's U.S. operations remained stable. This diversification across different business lines could make the stock a great option for long-term investors.

And despite the drop in earnings, the top bank announced that it would be increasing its quarterly dividend from $1.47 to $1.51. With the increase, BMO is now offering investors a dividend yield of 5.1%, which is well above the S&P 500 average of 1.5%.

In an environment where market volatility and economic uncertainties are prevalent, BMO's increased dividend payout can be particularly appealing to investors seeking stable and reliable income streams. Dividends are a crucial component of investment returns, especially in a low-interest-rate environment, providing shareholders with a regular income regardless of market conditions.

BMO's recent dividend increase, in the face of declining profits, may position the bank as a potentially attractive investment for those seeking long-term stability and consistent income. Trading at around 1.2 times its book value, the stock is also a cheap buy right now.