All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Canadian Imperial Bank in Focus
Headquartered in Toronto, Canadian Imperial Bank (CM) is a Finance stock that has seen a price change of 6.77% so far this year. The bank and financial services company is paying out a dividend of $1.02 per share at the moment, with a dividend yield of 5.34% compared to the Banks - Foreign industry's yield of 3.12% and the S&P 500's yield of 1.98%.
Taking a look at the company's dividend growth, its current annualized dividend of $4.25 is up 1.9% from last year. In the past five-year period, Canadian Imperial Bank has increased its dividend 2 times on a year-over-year basis for an average annual increase of 4.52%. 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. Right now, Canadian Imperial Bank's payout ratio is 44%, which means it paid out 44% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CM expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $9.42 per share, which represents a year-over-year growth rate of 0.86%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their 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
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