Commerce Bancshares (NASDAQ:CBSH) Will Pay A Larger Dividend Than Last Year At $0.27

Commerce Bancshares, Inc. (NASDAQ:CBSH) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of June to $0.27. Although the dividend is now higher, the yield is only 2.2%, which is below the industry average.

Check out our latest analysis for Commerce Bancshares

Commerce Bancshares' Earnings Will Easily Cover The Distributions

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 26%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to fall by 4.9% over the next year. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 31%, which would be comfortable for the company to continue in the future.

Commerce Bancshares Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.538, compared to the most recent full-year payment of $1.08. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Commerce Bancshares Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Commerce Bancshares has been growing its earnings per share at 9.3% a year over the past five years. Commerce Bancshares definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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.

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 can't be ignored. 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.