The Bank of Montreal is raising its dividend for the first time in five years as it reported Tuesday that third-quarter net income grew by 37 per cent.

BMO said its dividend will be boosted by two cents to 72 cents per share, marking the first increased since 2007.

In the quarter, the bank posted net income of $970 million or $1.42 per share, up from $708 million, or $1.09 per share, a year earlier.

On an adjusted basis, earnings were $1.01 billion, or $1.49 per share, beating analyst expectations by 10 cents a share, according to a survey by Thomson Reuters.

Adjusted results factor in the acquisition of U.S. bank Marshall & Ilsley Corp. last year.

"Our business continues to deliver consistent and attractive profitability within a sound risk framework and the growth we are experiencing remains consistent with our strategy," said president and CEO Bill Downe in a release.

Revenue increased to $3.88 billion from $3.32 billion.

Barclays analyst John Aiken said the results were a positive surprise.

"The dividend increase had not necessarily been anticipated and the bank was able to show some strong sequential growth in its U.S. platform," he wrote in a note.

Earlier this year, Downe highlighted the bank's continuing plans to lower costs across its operations as part of a long-term review that examines all of its businesses.

In June, the bank announced plans to close 24 of its U.S. BMO Harris bank branches in the U.S. Midwest in an effort to scale back on overlapping branches after the acquisition of a Milwaukee-based rival.

Bank of Montreal has more than 46,000 employees across its North American operations, which include retail banking, wealth management and investment banking, as well as the Chicago-based Harris Bank subsidiary.

Its dividend, payable Nov. 28 to shareholders of record Nov. 1, would produce an annual yield of just under five per cent based on the bank's closing share price of $57.70 Monday on the Toronto Stock Exchange.