Comerica (NYSE:CMA) Has Re-Affirmed Its Dividend Of US$0.68

Comerica Incorporated (NYSE:CMA) will pay a dividend of US$0.68 on the 1st of January. This means the annual payment is 3.1% of the current stock price, which is above the average for the industry.

View our latest analysis for Comerica

Comerica's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Comerica was paying a whopping 106% as a dividend, but this only made up 33% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS is forecast to fall by 22.3%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 51%, which is comfortable for the company to continue in the future.

Comerica Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.40 in 2011, and the most recent fiscal year payment was US$2.72. This means that it has been growing its distributions at 21% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Comerica has seen EPS rising for the last five years, at 28% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Comerica's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Comerica's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Comerica is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Comerica you should be aware of, and 1 of them is a bit unpleasant. We have also put together a list of global stocks with a solid dividend.

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.

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