Stock Analysis

Canadian Imperial Bank of Commerce (TSE:CM) Is Due To Pay A Dividend Of CA$1.46

TSX:CM
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The board of Canadian Imperial Bank of Commerce (TSE:CM) has announced that it will pay a dividend of CA$1.46 per share on the 28th of October. This payment means that the dividend yield will be 4.0%, which is around the industry average.

Check out our latest analysis for Canadian Imperial Bank of Commerce

Canadian Imperial Bank of Commerce's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Canadian Imperial Bank of Commerce was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 5.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

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TSX:CM Historic Dividend September 12th 2021

Canadian Imperial Bank of Commerce Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was CA$3.48 in 2011, and the most recent fiscal year payment was CA$5.84. This works out to be a compound annual growth rate (CAGR) of approximately 5.3% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Canadian Imperial Bank of Commerce May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Canadian Imperial Bank of Commerce has only grown its earnings per share at 4.9% per annum over the past five years. Canadian Imperial Bank of Commerce is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Canadian Imperial Bank of Commerce that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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