Commerce Bancshares' (NASDAQ:CBSH) Shareholders Will Receive A Bigger Dividend Than Last Year
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. Despite this raise, the dividend yield of 2.2% is only a modest boost to shareholder returns.
View our latest analysis for Commerce Bancshares
Commerce Bancshares' Payment Expected To Have Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end.
Commerce Bancshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. 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.
Over the next year, EPS is forecast to fall by 4.9%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 31%, which we are pretty comfortable with and we think would be feasible on an earnings basis.
Commerce Bancshares Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $0.538 total annually to $1.08. This means that it has been growing its distributions at 7.2% 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.
We Could See Commerce Bancshares' Dividend Growing
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend 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
Overall, a dividend increase is always good, and we think that Commerce Bancshares is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Commerce Bancshares 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.
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