Stock Analysis

Canadian Imperial Bank of Commerce (TSE:CM) Is Increasing Its Dividend To CA$0.87

TSX:CM
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Canadian Imperial Bank of Commerce (TSE:CM) will increase its dividend from last year's comparable payment on the 28th of July to CA$0.87. This takes the dividend yield to 6.0%, which shareholders will be pleased with.

See our latest analysis for Canadian Imperial Bank of Commerce

Canadian Imperial Bank of Commerce's Earnings Will Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, Canadian Imperial Bank of Commerce has a long history of paying out a part of its earnings to shareholders. Based on Canadian Imperial Bank of Commerce's last earnings report, the payout ratio is at a decent 65%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 54.0%. The future payout ratio could be 62% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

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TSX:CM Historic Dividend May 28th 2023

Canadian Imperial Bank of Commerce Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was CA$1.80 in 2013, and the most recent fiscal year payment was CA$3.48. This implies that the company grew its distributions at a yearly rate of about 6.8% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

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

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Although it's important to note that Canadian Imperial Bank of Commerce's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On Canadian Imperial Bank of Commerce's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Canadian Imperial Bank of Commerce that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Canadian Imperial Bank of Commerce is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.