Bank of Montreal confirmed its 2026 exit from the AIR MILES Reward Program, threatening approximately $8M in annual royalty income for Diversified Royalty Corp. BMO serves dual roles as program participant and financial guarantor of AM Royalties Limited Partnership, amplifying impact beyond typical partner departures.
Diversified Royalty derives income from AIR MILES transactions through its partnership ownership. Analysts project BMO's withdrawal could reduce the company's AIR MILES segment revenue by 15-20%. The firm reported $42.3M in total royalty income for fiscal 2025, with AIR MILES representing 35% of that figure.
The exit reflects a global banking shift toward proprietary loyalty programs. TD Bank, CIBC, and Scotiabank now operate independent systems, following strategies employed by major US banks like Chase and Citibank, which abandoned shared programs years ago. European banks including HSBC and Santander similarly prefer full control over customer data and rewards economics.
Dividend sustainability faces scrutiny as Diversified Royalty maintains monthly distributions of $0.02083 per share. The current 94% payout ratio leaves minimal buffer for revenue declines. A 15% drop in AIR MILES royalties would push the payout ratio above 100%, forcing dividend cuts or asset sales.
The company amended AIR MILES License Agreements on January 26, 2026, likely restructuring terms to address BMO's departure. Specific terms remain undisclosed. Diversified Royalty stock trades at $2.87 on the TSX, down 8% since BMO announced the transition.
Shared loyalty programs face pressure globally as financial institutions prioritize proprietary systems. Similar consolidation occurred in the US market between 2015-2020, when multiple banks withdrew from coalition programs. The UK's Nectar program and Australia's Qantas Frequent Flyer have faced comparable partner retention challenges.
Management has not provided updated 2026 guidance following the announcement. Investors await Q1 2026 results in May to assess actual revenue impact and potential strategic responses. The broader trend suggests additional AIR MILES partners may reconsider participation, creating cascading risk for Diversified Royalty's income profile as banks worldwide continue consolidating loyalty operations.
Sources:
1 Globe Newswire, "Diversified Royalty Corp. Announces Fourth Quarter and Year End 2025 Results" (March 19, 2026)
2 Globe Newswire, "Diversified Royalty Corp. Announces March 2026 Cash Dividend" (March 04, 2026)
3 Globe Newswire, "Tech Entrepreneur Yanik Guillemette Publishes Strategic Analysis of Canada’s Regulatory Framework an" (March 22, 2026)
4 Yahoo Finance, "Kraft Heinz to Invest $250 Million in Montreal’s Mont Royal Factory to Strengthen Canadian Manufactu" (March 20, 2026)
5 Globe Newswire, "Diversified Royalty Corp. Announces Amendment to AIR MILES® Licenses" (January 26, 2026)