Commerce Bancshares (NASDAQ:CBSH) Has Re-Affirmed Its Dividend Of US$0.27

Commerce Bancshares, Inc.'s (NASDAQ:CBSH) investors are due to receive a payment of US$0.27 per share on 22nd of June. This means the annual payment will be 1.6% of the current stock price, which is lower than the industry average.

See our latest analysis for Commerce Bancshares

Commerce Bancshares' Payment Has 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. However, prior to this announcement, Commerce Bancshares' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 7.8% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 29%, which is comfortable for the company to continue in the future.

Commerce Bancshares 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. Since 2012, the first annual payment was US$0.54, compared to the most recent full-year payment of US$1.06. This works out to be a compound annual growth rate (CAGR) of approximately 7.0% 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.

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 impressed us by growing EPS at 15% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Commerce Bancshares' prospects of growing its dividend payments in the future.

We Really Like Commerce Bancshares' Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Commerce Bancshares that you should be aware of before investing. Is Commerce Bancshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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