Canadian Imperial Bank of Commerce (TSE:CM) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of January to CA$0.90. This makes the dividend yield 6.4%, which is above the industry average.
Canadian Imperial Bank of Commerce's Dividend Forecasted To Be Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained.
Canadian Imperial Bank of Commerce 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 Canadian Imperial Bank of Commerce's payout ratio of 67% is a good sign as this means that earnings decently cover dividends.
Looking forward, EPS is forecast to rise by 49.2% over the next 3 years. The future payout ratio could be 59% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
Canadian Imperial Bank of Commerce Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from CA$1.88 total annually to CA$3.60. This means that it has been growing its distributions at 6.7% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Canadian Imperial Bank of Commerce May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Over the past five years, it looks as though Canadian Imperial Bank of Commerce's EPS has declined at around 2.8% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
Our Thoughts On Canadian Imperial Bank of Commerce's Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Canadian Imperial Bank of Commerce that investors should know about before committing capital to this stock. 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.