Commerce Bancshares (NASDAQ:CBSH) Will Pay A Dividend Of $0.27

Commerce Bancshares, Inc. (NASDAQ:CBSH) has announced that it will pay a dividend of $0.27 per share on the 18th of June. This means the annual payment will be 2.0% of the current stock price, which is lower than the industry average.

View our latest analysis for Commerce Bancshares

Commerce Bancshares' Payment Expected To Have Solid Earnings Coverage

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. Past distributions do not necessarily guarantee future ones, but Commerce Bancshares' payout ratio of 29% is a good sign as this means that earnings decently cover dividends.

The next year is set to see EPS grow by 14.8%. If the dividend continues on this path, the future payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

Commerce Bancshares Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.526, compared to the most recent full-year payment of $1.08. This works out to be a compound annual growth rate (CAGR) of approximately 7.5% a year 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.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 4.0% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Commerce Bancshares could always pay out a higher proportion of earnings to increase shareholder returns.

We Really Like Commerce Bancshares' Dividend

Overall, we like to see the dividend staying consistent, and we think Commerce Bancshares might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Commerce Bancshares (1 doesn't sit too well with us!) 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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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.