Canadian Imperial Bank (CM) Could Be a Great Choice

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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.

Headquartered in Toronto, Canadian Imperial Bank (CM) is a Finance stock that has seen a price change of 23.77% so far this year. The bank and financial services company is paying out a dividend of $0.78 per share at the moment, with a dividend yield of 2.8% compared to the Banks - Foreign industry's yield of 2.92% 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.

Looking at this fiscal year, CM expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $7.51 per share, which represents a year-over-year 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. 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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This article originally published on Zacks Investment Research (zacks.com).

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