TD Securities Upgrades Bank of Montreal to Buy, Citing Improved Profitability Outlook

Bank of Montreal (NYSE:BMO), a fixture among high-yield dividend stocks with sustainable payouts, has received a significant vote of confidence from analysts at TD Securities.

On January 28, TD Securities analyst Mario Mendonca upgraded BMO from Hold to Buy, lifting his price target to C$209 from C$184. The catalyst for the move was a strategic shift in the bank's own guidance. BMO has refined its medium-term outlook, now targeting a return on equity (ROE) of 15% by the end of 2027, a timeline the firm views "very favourably." Mendonca noted this update implies an expected ROE increase of approximately 300 basis points over the next two years, potentially outperforming its peer group by about 150 basis points.

The bank's diversified operations across Canadian and U.S. retail banking, wealth management, and capital markets provide a balanced earnings stream, insulating it from sector-specific downturns. This stability is reflected in a share price that has climbed nearly 40% over the past year.

BMO capped off its 2025 fiscal year with robust fourth-quarter results, reporting adjusted profit of $2.5 billion ($3.28 per share), a significant jump from $1.5 billion ($1.90 per share) a year earlier. Full-year adjusted net income reached $9.3 billion, with EPS at $12.16. The stock currently trades at a P/E multiple of around 16.4x and offers a forward dividend yield of roughly 3.5%.

Looking ahead, investor focus will likely center on credit quality trends, loan demand, and the impact of future interest rate movements on net interest margins. A primary risk remains valuation; after a strong rally, the sector may appear richly priced, and any economic softening could pressure loan loss provisions.

Market Voices:

• Michael R., Portfolio Manager: "This upgrade is a logical follow-through on BMO's own guidance shift. The ROE trajectory, coupled with its geographic and business diversification, makes a compelling case for the stock at this stage."
• Sarah Chen, Retail Investor: "As a long-term holder, I appreciate the consistent dividend. The raised target and improved ROE path confirm the management's execution is translating to tangible metrics."
• David Forsythe, Independent Analyst: "Let's not get carried away. The entire banking sector is riding a wave of optimism. A 15% ROE target four years out is a promise, not a guarantee. This feels like analysts playing catch-up to a stock that's already had a massive run."
• Priya Sharma, Wealth Advisor: "For income-focused clients, BMO remains a core holding. The upgrade adds a growth catalyst narrative to the existing yield story, which is a powerful combination."