Bank of Montreal 2004 Annual Report Download - page 27

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BMO Financial Group Annual Report 2004 23
MD&A
Value Measures
Highlights
•We met or surpassed all of our performance targets in 2004.
•Total Shareholder Return (TSR)
–
BMO investors have earned an average
annual TSR of 18.9% over the past five years and earned 20.0% in 2004.
•Earnings per Share (EPS) Growth
–
EPS increased 29% in 2004 to a record
$4.42, following a 28% increase in the prior year.
•Return on Equity (ROE)
–
BMO’s ROE was 19.4% in 2004, the highest
since 1978, and BMO is the only major bank in North America to earn
an ROE of more than 13% for 15 consecutive years.
•Net Economic Profit (NEP)
–
All operating groups contributed to our
highest-ever NEP,
with NEP in Private Client Group and Investment Banking
Group growing strongly.
•The quarterly dividend on our common shares was raised twice during the
year, increasing by a total of 26% from a year ago.
BMO’s governing objective is to maximize the total return
to our shareholders and generate, over time, first-quartile total
shareholder return (TSR) relative to our Canadian and North
American peer groups.
The five-year average annual TSR is a key measure of
shareholder value and is the most important of our financial
performance and condition measures, since it assesses our
success in achieving our governing objective of maximizing
return to shareholders. Over the past five years, shareholders
have earned an average annual TSR of 18.9% on their invest-
ment in BMO’s common shares. This compares favourably
with an average annual return for the S&P/TSX Composite
Total Return Index of 5.8% over the same period and was above
the return for the S&P/TSX Financial Services Total Return Index
of 18.1%. Dividends paid over the period and appreciation in
BMO’s share price are outlined in the table below. An invest-
ment of $1,000 in Bank of Montreal common shares made at
the beginning of fiscal 2000 would have been worth $2,376
at
October 31, 2004, assuming reinvestment of dividends,
for a
total return of 138%. Dividends paid over the five years
have increased at an average annual rate of 10%. In 2004, the
quarterly dividend on our common shares was raised twice,
increasing by a total of 26% from the fourth quarter of 2003.
The average annual TSR of 18.9% for this most recent
five-year period was up appreciably from the 12.9% average
annual return for the five years ended October 31, 2003.
The averages are affected by the yearly TSRs included in the
calculations. The improvement reflected the removal of
the negative 7.4% yearly return earned in 1999 from the
averaging calculation and its replacement with the 20.0%
return earned this year.
The 20.0% TSR earned in fiscal 2004 compared favourably
with the 16.1% return of the S&P/TSX Composite Total Return
Index. Our one-year TSR was slightly below the S&P/TSX
Financial Services Total Return Index.
Pages 18 and 20 provide further comment on shareholder
return and include peer group comparisons.
The five-year average annual total shareholder return (TSR)
represents the average annual total return earned on an investment
in BMO common shares made at the beginning of a five-year period.
The return includes the change in share price and assumes that divi-
dends received were reinvested in additional common shares. The
one-year TSR also assumes that dividends were reinvested in shares.
Total Shareholder Return
Five-Year Average Annual
Total Shareholder Return (%)
*Total return
(2.2)
5.8
18.1 18.9
BMO
common
shares*
S&P/TSX
Financial
Services
Index*
S&P/TSX
Composite
Index*
S&P 500
Index*
One-Year Total
Shareholder Return (%)
*Total return
9.4
16.1
20.7 20.0
BMO
common
shares*
S&P/TSX
Financial
Services
Index*
S&P/TSX
Composite
Index*
S&P 500
Index*
Total Shareholder Return
For the year ended October 31 2004 2003 2002 2001 2000 Five-year CAGR (1)
Closing market price per common share ($) 57.55 49.33 38.10 33.86 35.25 15.2%
Dividends paid ($ per share) 1.50 1.29 1.18 1.09 0.99 10.1%
Dividends paid (%) 3.0 3.4 3.5 3.1 3.5
Increase (decrease) in share price (%) 16.7 29.5 12.5 (3.9) 24.4
Total annual shareholder return (%) (2) 20.0 33.4 16.2 (1.2) 29.0
(1) Compound annual growth rate (CAGR).
(2) Total annual shareholder return assumes reinvestment of quarterly dividends and therefore does not equal the sum of dividend and share price returns in the table.
Our strong returns to shareholders
have outperformed market indices
over five years.
Our one-year return of 20% was in line
with the financial services index
and
above the market averages.