Stock Analysis

Canadian Imperial Bank of Commerce (TSE:CM) Is Paying Out A Larger Dividend Than Last Year

TSX:CM
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Canadian Imperial Bank of Commerce (TSE:CM) has announced that it will be increasing its dividend on the 28th of January to CA$1.61. The announced payment will take the dividend yield to 4.3%, which is in line with the average for the industry.

View our latest analysis for Canadian Imperial Bank of Commerce

Canadian Imperial Bank of Commerce's Earnings Easily Cover the Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Canadian Imperial Bank of Commerce's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 2.5% over the next year. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

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TSX:CM Historic Dividend December 5th 2021

Canadian Imperial Bank of Commerce Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was CA$3.48 in 2011, and the most recent fiscal year payment was CA$6.44. This works out to be a compound annual growth rate (CAGR) of approximately 6.3% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Canadian Imperial Bank of Commerce has been growing its earnings per share at 5.4% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Canadian Imperial Bank of Commerce is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 11 analysts we track are forecasting for Canadian Imperial Bank of Commerce for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.