An Analysis of the Bank's Dividend Performance and Future Prospects
Canadian Imperial Bank of Commerce (CM, Financial) recently announced a dividend of $0.87 per share, payable on 2023-10-27, with the ex-dividend date set for 2023-09-27. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Canadian Imperial Bank of Commerces dividend performance and assess its sustainability.
What Does Canadian Imperial Bank of Commerce Do?
Canadian Imperial Bank of Commerce is Canada's fifth-largest bank and operates three business segments: retail and business banking, wealth management, and capital markets. It serves approximately 11 million personal banking and business customers, primarily in Canada.
A Glimpse at Canadian Imperial Bank of Commerce's Dividend History
Canadian Imperial Bank of Commerce has maintained a consistent dividend payment record since 1989. Dividends are currently distributed on a quarterly basis.
Canadian Imperial Bank of Commerce has increased its dividend each year since 2010. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 13 years.
Breaking Down Canadian Imperial Bank of Commerce's Dividend Yield and Growth
As of today, Canadian Imperial Bank of Commerce currently has a 12-month trailing dividend yield of 6.37% and a 12-month forward dividend yield of 6.45%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Canadian Imperial Bank of Commerce's annual dividend growth rate was 5.30%. Extended to a five-year horizon, this rate decreased to 4.60% per year. And over the past decade, Canadian Imperial Bank of Commerce's annual dividends per share growth rate stands at 6.10%.
Based on Canadian Imperial Bank of Commerce's dividend yield and five-year growth rate, the 5-year yield on cost of Canadian Imperial Bank of Commerce stock as of today is approximately 7.98%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-07-31, Canadian Imperial Bank of Commerce's dividend payout ratio is 0.70. This may suggest that the company's dividend may not be sustainable.
Canadian Imperial Bank of Commerce's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Canadian Imperial Bank of Commerce's profitability 6 out of 10 as of 2023-07-31, suggesting fair profitability. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Canadian Imperial Bank of Commerce's growth rank of 6 out of 10 suggests that the company has a fair growth outlook.
Revenue is the lifeblood of any company, and Canadian Imperial Bank of Commerce's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Canadian Imperial Bank of Commerce's revenue has increased by approximately 5.10% per year on average, a rate that underperforms than approximately 57.13% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Canadian Imperial Bank of Commerce's earnings increased by approximately 6.10% per year on average, a rate that underperforms than approximately 57.27% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 3.20%, which underperforms than approximately 68.54% of global competitors.
Next Steps
In conclusion, while Canadian Imperial Bank of Commerce maintains a strong dividend yield and growth rate, its high payout ratio and underperformance in certain growth metrics raise questions about the sustainability of its dividend payments in the long term. Investors are encouraged to consider these factors carefully before making an investment decision.
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