Bank of Montreal 2013 Annual Report Download - page 54

Outstanding Shares and Securities Convertible into
Common Shares
Number of shares Dividends declared per share
or dollar amount
As at November 27, 2013 (in millions) 2013 2012 2011
Common shares 644 $2.94 $2.82 $2.80
Class B Preferred shares
Series 5 (1) – – $1.33 $1.33
Series 13 $350 $1.13 $1.13 $1.13
Series 14 $250 $1.31 $1.31 $1.31
Series 15 $250 $1.45 $1.45 $1.45
Series 16 (2) $157 $1.19 $1.30 $1.30
Series 17 (2) $143 $0.17 – –
Series 18 $150 $1.63 $1.63 $1.63
Series 21 $275 $1.63 $1.63 $1.63
Series 23 $400 $1.35 $1.35 $1.35
Series 25 $290 $0.98 $0.98 $0.69
Convertible into common shares:
Class B Preferred shares
Series 10 (3) – – US$0.37 US$1.49
Stock options
– vested 7.1
– non-vested 7.7
(1) Redeemed in February 2013.
(2) In August 2013, approximately 5.7 million Series 16 Preferred shares were converted into
Series 17 Preferred shares on a one-for-one basis.
(3) Redeemed in February 2012.
Note 20 on page 163 of the financial statements includes details on share capital.
Dividends
Dividends declared per common share in fiscal 2013 totalled $2.94.
Annual dividends declared represented 47% of net income and adjusted
net income available to common shareholders on a last twelve months
basis. Over the long term, BMO’s dividends are generally increased in
line with trends in earnings per share growth.
Our target dividend payout range (common share dividends as a
percentage of net income available to shareholders, less preferred share
dividends, based on adjusted earnings over the last twelve months) is
40-50%, which is consistent with our objective of maintaining flexibility
to execute on our growth strategies and takes into consideration the
higher capital expectations resulting from the Basel III rules. BMO’s
target dividend payout range seeks to provide shareholders with stable
income, while ensuring sufficient earnings are retained to support
anticipated business growth, fund strategic investments and provide
continued support for depositors.
At year end, BMO’s common shares provided a 4.0% annual divi-
dend yield based on the year-end closing share price and dividends
declared in the last four quarters. On December 3, 2013, BMO
announced that the Board of Directors had declared a quarterly dividend
on common shares of $0.76 per share, up $0.02 from the prior quarter
and up $0.04 from a year ago. The dividend is payable on February 26,
2014 to shareholders of record on February 3, 2014.
Common shareholders may elect to have their cash dividends
reinvested in common shares of BMO in accordance with the DRIP. In
the first three quarters of 2013, common shareholders who elected to
reinvest dividends in common shares of BMO were issued shares from
treasury. Commencing with the dividend paid in the fourth quarter of
2013, common shares to supply the DRIP were purchased on the open
market. BMO may elect to revert to treasury issuances at its discretion
by providing notice to shareholders before the dividends are paid.
Eligible Dividends Designation
For the purposes of the Income Tax Act (Canada) and any similar provin-
cial and territorial legislation, BMO designates all dividends paid or
deemed to be paid on both its common and preferred shares as
“eligible dividends”, unless indicated otherwise.
Caution
This Enterprise-Wide Capital Management section contains forward-looking statements.
Please see the Caution Regarding Forward-Looking Statements.
MD&A
Select Financial Instruments
The Financial Stability Board (FSB) issued a report encouraging enhanced
disclosure related to financial instruments that market participants had
come to regard as carrying higher risk. An index of where the disclosures
recommended by the Enhanced Disclosure Task Force of the FSB are
located is provided on page 75.
Caution
Given continued uncertainty in the capital markets environment, our
capital markets instruments could experience valuation gains and losses
due to changes in market value. This section, Select Financial Instru-
ments, contains forward-looking statements. Please see the Caution
Regarding Forward-Looking Statements on page 29.
Consumer Loans
In the United States, mortgage loans and home equity products are
underwritten to conservative standards relative to credit scores and loan
to value ratios and capacity assessment is generally based upon docu-
mented and verifiable income. Non-traditional mortgage programs such
as interest-only mortgages were discontinued at the onset of the recent
economic downturn and account for less than 1% of the U.S. mortgage
portfolio. Indirect lending (primarily auto loans) is also predicated upon
strong underwriting criteria and leverages a well-managed dealer
network across a diverse geographic footprint.
In Canada, BMO does not have any subprime mortgage programs,
nor do we purchase subprime mortgage loans from third-party lenders.
Leveraged Finance
Leveraged finance loans are defined by BMO as loans to private equity
businesses and mezzanine financings where our assessment indicates a
higher level of credit risk. BMO has exposure to leveraged finance loans,
which represent 1.2% of our total assets, with $6.5 billion outstanding
at October 31, 2013, up approximately $0.7 billion from a year ago. Of
this amount, $82 million or 1.3% of leveraged finance loans were classi-
fied as impaired ($152 million or 2.6% in 2012).
Monoline Insurers and Credit Derivative Product
Companies
At October 31, 2013, BMO’s direct exposure to companies that specialize
in providing default protection was winding down and amounted to
$10 million of the mark-to-market value of counterparty derivatives
($25 million in 2012). The cumulative adjustment for counterparty credit
risk recorded against these exposures was $nil ($6 million in 2012).
Certain credit derivative product counterparty exposures are discussed
further in the Exposure to Other Select Financial Instruments section.
BMO Financial Group 196th Annual Report 2013 65