Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Based in Toronto, Canadian Imperial Bank (CM) is in the Finance sector, and so far this year, shares have seen a price change of 20.42%. The bank and financial services company is paying out a dividend of $0.78 per share at the moment, with a dividend yield of 2.87% compared to the Banks - Foreign industry's yield of 2.74% and the S&P 500's yield of 1.44%.
Looking at dividend growth, the company's current annualized dividend of $3.14 is up 13.4% from last year. Over the last 5 years, Canadian Imperial Bank has increased its dividend 4 times on a year-over-year basis for an average annual increase of 4.50%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Canadian Imperial Bank's current payout ratio is 45%, meaning it paid out 45% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CM expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $7.43 per share, with earnings expected to increase 20.81% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, CM is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of #3 (Hold).
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Canadian Imperial Bank of Commerce (CM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).