Commerce Bancshares' (NASDAQ:CBSH) Dividend Will Be Increased To $0.27

Commerce Bancshares, Inc.'s (NASDAQ:CBSH) dividend will be increasing from last year's payment of the same period to $0.27 on 27th of March. This takes the annual payment to 1.5% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Commerce Bancshares

Commerce Bancshares' Payment Expected To Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having distributed dividends for at least 10 years, Commerce Bancshares has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 26%, which means that Commerce Bancshares would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 16.1% over the next 3 years. Analysts forecast the future payout ratio could be 33% over the same time horizon, which is a number we think the company can maintain.

Commerce Bancshares Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.538 in 2013, and the most recent fiscal year payment was $1.01. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Commerce Bancshares has seen EPS rising for the last five years, at 11% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Commerce Bancshares' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Commerce Bancshares you should be aware of, and 1 of them makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection 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.