Bank of Montreal 2007 Annual Report Download - page 35

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MD&A
Value Measures
BMO Financial Group 190th Annual Report 2007 31
Highlights
•Total Shareholder Return (TSR) –BMO shareholders have earned
an average annual return of 14.2% over the past five years.
The TSR in 2007 was –5.8%.
•Earnings per share (EPS) growth –EPS fell 20% from 2006 after
having grown to record levels for four straight years. Excluding the
impact of significant items, EPS increased 11%.
•Net income was $2.1 billion, with P&C Canada and Private Client
Group earning record net income. Excluding the impact of signifi-
cant items, net income was $2.9 billion with strong results in
BMO Capital Markets.
•
Return on Equity (ROE) –BMO’s ROE was 14.4%, reflecting
the core strengths and benefits of our diversified businesses.
Excluding the impact of significant items, ROE was 19.8%,
the highest in 20 years. ROE has exceeded 13% for 18 consecutive
years, distinguishing BMO as the only bank in its North American
peer group with this level of earnings consistency.
•The quarterly dividend declared per common share was raised
three times in 2007, with total dividends declared increasing 20%
over the 2006 total. Dividends paid have increased at an annual
rate of 17.4% over the past five years.
Total Shareholder Return
BMO’s governing objective is to maximize the total return to our share-
holders 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 gov-
erning objective of maximizing return to shareholders. Over the past
five years, shareholders have earned an average annual TSR of 14.2%
on their investment in BMO common shares. This return was lower
than the 21.0% average annual return for the S&P/TSX Composite Total
Return Index and the 21.4% return for the S&P/TSX Financial Services
Total Return Index. The table below summarizes dividends paid on BMO
common shares over the past five years and the appreciation in BMO’s
share price. An investment of $1,000 in Bank of Montreal common shares
made at the beginning of fiscal 2003 would have been worth $1,941 at
October 31, 2007, assuming reinvestment of dividends, for a total return
of 94.1%. Dividends paid over the five-year period have increased
at an average annual compound rate of 17.4%. Dividends paid increased
in two of four quarters in 2007, rising 10% from $0.62 per share in the
fourth quarter of 2006 to $0.68 per share in the fourth quarter of 2007,
following a 35% increase in 2006. Dividends paid on each common
share increased 23% in 2007 to $2.63.
The average annual TSR of 14.2% for the most recent five-year
period decreased from the 19.1% average annual return for the five years
ended October 31, 2006. The averages are affected by the one-year TSRs
included in the calculations.
Page 24 provides further comment on total shareholder return and
includes peer group comparisons.
The five-year average annual total shareholder return (TSR)
represents the average annual total return earned on an investment
in BMO common shares made at the beginning of a five-year
period. The return includes the change in share price and assumes
that dividends received were reinvested in additional common
shares. The one-year TSR also assumes that dividends were
reinvested in shares.
BMO shares underperformed
in relation to our benchmarks
in 2007.
Our five-year return to share-
holders had surpassed our
benchmarks until 2007.
21.0 21.4
13.9 14.2
Five-Year Average Annual
Total Shareholder Return (%)
*Total return
BMO
common
shares*
S&P/TSX
Financial
Services
Index*
S&P/TSX
Composite
Index*
S&P 500
Index*
21.4
14.6 14.2
(5.8)
One-Year Total
Shareholder Return (%)
*Total return
BMO
common
shares*
S&P/TSX
Financial
Services
Index*
S&P/TSX
Composite
Index*
S&P 500
Index*
Total Shareholder Return
Five-year
For the year ended October 31 2007 2006 2005 2004 2003 CAGR (1)
Closing market price per common share ($)
63.00 69.45 57.81 57.55 49.33 10.6
Dividends paid ($ per share)
2.63 2.13 1.80 1.50 1.29 17.4
Dividends paid (%)
3.8 3.7 3.1 3.0 3.4
Increase (decrease) in share price (%)
(9.3) 20.1 0.5 16.7 29.5
Total annual shareholder return (%)
(5.8) 24.1 3.7 20.0 33.4
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.
(1) Compound annual growth rate (CAGR).