Commerce Bancshares (NASDAQ:CBSH) Has Announced That It Will Be Increasing Its Dividend To $0.275

Commerce Bancshares, Inc. (NASDAQ:CBSH) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of March to $0.275. 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' Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Commerce Bancshares has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Commerce Bancshares' last earnings report, the payout ratio is at a decent 27%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 27.8% over the next 3 years. The future payout ratio could be 31% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Commerce Bancshares Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.526 in 2015 to the most recent total annual payment of $1.03. This means that it has been growing its distributions at 6.9% per annum over that time. 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.

Commerce Bancshares Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Commerce Bancshares has impressed us by growing EPS at 6.9% per year over the past five years. 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

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Commerce Bancshares 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.

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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.