All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
Canadian Imperial Bank (CM) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of 18.63% since the start of the year. The bank and financial services company is currently shelling out a dividend of $0.78 per share, with a dividend yield of 2.92%. This compares to the Banks - Foreign industry's yield of 2.71% and the S&P 500's yield of 1.39%.
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 47%, meaning it paid out 47% of its trailing 12-month EPS as dividend.
CM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $7.51 per share, representing a year-over-year earnings growth rate of 22.11%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. That said, they can take comfort from the fact that CM is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Canadian Imperial Bank of Commerce (CM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).