Bank of Montreal 2008 Annual Report Download - page 37

MD&A
BMO Financial Group 191st Annual Report 2008 | 33
Value Measures
Highlights
•Total shareholder return (TSR) –Lower equity valuations have
reduced the average annual return to 0.9% over the past
five years. Our one-year TSR in 2008 was –27.9%, slightly better
than comparable indices.
•Earnings per share (EPS) growth –EPS fell 9% from 2007 in
difficult market conditions, due primarily to higher credit losses.
•Net income was $2.0 billion, with P&C Canada and Private
Client Group earning very solid net income. BMO Capital Markets
results were up sharply from a year ago. Results were impacted
by higher provisions for credit losses at this point in the credit
cycle and by weaker capital markets.
•
Return on equity (ROE) – BMO’s ROE was 13.0%, reflecting the
core strengths and benefits our diversified businesses provide
in
difficult market conditions. BMO has earned ROE of 13% or more
for 19 consecutive years, distinguishing BMO as the only bank in
its North American peer group with this level of earnings
consistency, the value of which was especially apparent in 2008.
•The quarterly dividend declared per common share remained
the same in 2008 but total dividends paid in 2008 of $2.80 per
share increased 6.5% over the 2007 total. Dividends paid
have increased at an average annual rate of 16.8% 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, top-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 0.9%
on their investment in BMO common shares. This return was lower
than the 7.0% average annual return for the S&P/TSX Composite Total
Return Index and the 1.8% return for the S&P/TSX Financial Services
Total Return Index, but higher than the 0.3% return for the S&P 500
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 2004 would have been worth
$1,048 at October 31, 2008, assuming reinvestment of dividends, for
a total return of 4.8%. Dividends paid over the five-year period have
increased at an average annual compound rate of 16.8%. Dividends paid
were $0.70 per common share in each quarter of 2008 and increased
6.5% from 2007 to $2.80 per share in 2008, following a 23% increase
in 2007.
The average annual TSR of 0.9% for the most recent five-year period
decreased from the 14.2% average annual return for the five years
ended October 31, 2007. The averages are affected by the one-year TSRs
included in the calculations.
Page 26 provides further comment on total shareholder return and
includes peer group comparisons.
The five-year average annual total shareholder return (TSR)
represents the average annual total return earned on an investment
in BMO common shares made at the beginning of a five-year
period. The return includes the change in share price and assumes
that dividends received were reinvested in additional common
shares. The one-year TSR also assumes that dividends were
reinvested in shares.
Equity markets were weak
in 2008; BMO’s returns were
slightly better than the
comparable indices.
Average annual returns have
been affected by results in 2008.
7.0
1.8
0.3 0.9
Five-Year Average Annual
Total Shareholder Return (%)
*Total return
BMO
common
shares*
S&P/TSX
Financial
Services
Index*
S&P/TSX
Composite
Index*
S&P 500
Index*
(31.4)
(36.1) (32.3) (27.9)
One-Year Total
Shareholder Return (%)
*Total return
BMO
common
shares*
S&P/TSX
Financial
Services
Index*
S&P/TSX
Composite
Index*
S&P 500
Index*
Total Shareholder Return
Five-year
For the year ended October 31 2008 2007 2006 2005 2004 CAGR (1)
Closing market price per common share ($) 43.02 63.00 69.45 57.81 57.55 (2.7)
Dividends paid ($ per share) 2.80 2.63 2.13 1.80 1.50 16.8
Dividends paid (%) (2) 4.4 3.8 3.7 3.1 3.0
Increase (decrease) in share price (%) (31.7) (9.3) 20.1 0.5 16.7
Total annual shareholder return (%) (27.9) (5.8) 24.1 3.7 20.0
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) %.
(2) As a percentage of the closing market price in the prior year.