Commerce Bancshares, Inc. (CBSH) announced major capital deployment actions to enhance shareholders’ value. Apart from the regular quarterly cash dividend, the company declared special cash dividend and stock dividend.
Commerce Bancshares’ Board of Directors approved a 5% stock dividend. The dividend is payable on December 17 to the shareholders of record as of November 30. Moreover, the shareholders will be receiving cash for fractional shares. The cash amount will be determined on the basis of the company’s share price on November 30.
In addition, Commerce Bancshares announced a regular cash dividend of 23 cents per share and a special cash dividend of $1.50 per share. Both these dividends will be paid on December 17 to the shareholders of record as of November 30. However, these two dividends will not be paid on any shares that would be issued in connection with the 5% stock dividend.
The announcement of the special dividend comes on the heels of a probable rise in tax rates on dividends from next year and Commerce Bancshares’ strong capital position. As of September 30, 2012, the company’s tier I leverage ratio came in at 10.00%, up from 9.73% in the prior quarter and 9.74% in the prior-year quarter.
Commerce Bancshares continues to meaningfully enhance shareholders’ value. Even during the financial crisis, the company has continuously hiked quarterly dividends. The last hike was made in February when the company raised its quarterly dividend by nearly 5% to the current 23 cents per share.
Further, unlike one of its peers, TCF Financial Corporation (TCB), which has not repurchased any shares since October 2007, Commerce Bancshares has a share repurchase program in place. In July, the company announced the buyback of additional shares, thereby bringing the total authorization to 3,000,000 shares. During the third quarter, the company repurchased 98,000 shares at an average price of $39.66 per share.
Even after declaring dividends, Commerce Bancshares will be able to maintain its strong capital and balance sheet levels. This would position the company comfortably for expansion via acquisitions as well as through organic growth.
Commerce Bancshares currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we maintain a long-term Neutral recommendation on the shares.
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