Last update on 2024-06-27

Commerce Bancshares (CBSH) - Dividend Analysis (Final Score: 6/8)

Explore Commerce Bancshares (CBSH) dividend analysis with a final score of 6/8. Understand stability, performance, and growth in dividend policy for savvy investors.

Short Analysis - Dividend Score: 6

We're running Commerce Bancshares (CBSH) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Commerce Bancshares' dividend policy is evaluated based on eight criteria. The overall dividend score is 6 out of 8. Key points: the company's dividend yield is 1.9255%, which is lower than the industry average of 2.76%, indicating it may not attract income-focused investors. On the positive side, the average dividend growth rate over the past 20 years is 10.57%, far above the 5% threshold, showcasing strong growth potential. The average payout ratio of 42.38% is below the 65% mark, indicating good financial balance. Earnings sufficiently cover dividends, maintaining a healthy payout ratio with few exceptions. Cash flow coverage ratios show some variability, reflecting a conservative payout stance and resilience against economic fluctuations. Notably, stable and growing dividends over the past 20 years highlight CBSH's reliability. The effectiveness of stock repurchase over the past 20 years was not deeply analyzed but is an important factor for shareholder value.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Commerce Bancshares has a solid dividend policy with consistent growth and reliable payouts, making it a stable choice for long-term investors. However, the lower-than-average dividend yield may be a downside for income-focused investors. If you're looking for stability and long-term growth potential in a dividend-paying stock, CBSH could be worth considering. It may not be the best pick if high yield is your primary objective, but its financial health, consistent dividend growth, and stability make it appealing for investors with a long-term perspective.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It serves as an indicator of the income generated by owning the stock, and a higher yield can attract income-focused investors.

Commerce Bancshares has a dividend yield of 1.9255%, which is lower than the industry average of 2.76%. Historically, CBSH's dividend yield has been fairly volatile, spiking as high as 6.5749% in 2012 and dipping to around 1.5% in recent years. Despite offering a generally consistent payout, as evidenced by its increasing dividend per share every year, the yield has not managed to stay above the industry average consistently. The closed stock price has increased, except a dip in recent years which might've slightly improved the yield. This lower-than-average yield could be a drawback for income-seeking investors who might prefer higher-yielding options in the industry. However, it could also indicate a stable, relatively mature company that may focus more on sustainable growth and less on high dividend payouts.

Average annual Growth Rate higher than 5% in the last 20 years?

Examining the Dividend Growth Rate over a period of 20 years is essential to understanding the company’s long-term commitment to returning value to its shareholders.

The average Dividend Growth Rate for Commerce Bancshares over the past 20 years is approximately 10.57%. This is significantly higher than the threshold of 5%, indicating a strong track record of consistent dividend growth. Persistently high dividend growth signifies the company's robust financial health and its ability to generate and distribute profits effectively. While there are years with negative growth rates and considerable fluctuations (e.g., 2009 with -2.15% and 2011 with 166.27%) which suggest volatility, the overall trend is profoundly promising. This high growth rate can be ascribed to efficient financial management, number growth in profitability, or an expanding business. Hence, this trend is decidedly positive for long-term investors who prioritize dividend income.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio measures the proportion of earnings that are distributed as dividends to shareholders. A sustainable payout ratio is typically less than 65%.

The average payout ratio of Commerce Bancshares (CBSH) over the last 20 years is approximately 42.38%, well below the 65% threshold. This indicates that the company is maintaining a balanced approach between rewarding shareholders and retaining earnings for future growth. Moreover, the consistency in maintaining the payout ratio levels, apart from an anomaly in 2012, reflects prudent financial management. Therefore, this trend bodes well for long-term sustainability and indicates lower risk of dividend cuts despite economic fluctuations.

Dividends Well Covered by Earnings?

Dividend coverage by earnings per share (EPS) indicates how many times a company can pay dividends to its shareholders from its net income.

Analyzing the data from 2003 to 2023, Commerce Bancshares (CBSH) shows a strong tendency to cover its dividends by its earnings. The figures reveal a substantial margin where EPS exceeds DPS consistently. For instance, in 2021, the EPS of 3.9572 covers the DPS of 1.015 nearly fourfold, reflecting a healthy payout ratio. However, during certain years like 2012 and 2020, the coverage saw dips closer to par, implying tighter margins. Nevertheless, the overall trend remains robust generally above the critical level of 2, indicating that the dividends are well-covered, which is a positive sign for investors seeking stable and reliable income.

Dividends Well Covered by Cash Flow?

Examining whether dividends are covered by cash flow ensures that the company generates sufficient cash to meet its dividend obligations, which is indicative of sustainable payout practices.

Evaluating CBSH's trend from 2003 to 2023, the dividend coverage ratio has fluctuated significantly over the years, peaking at 0.6078x in 2012 and hitting its lowest at 0.1199x in 2010. The overall pattern reveals variability, indicating periods where free cash flow either comfortably covered dividends or fell short. Despite the ups and downs, the most recent years show coverage ratios around 0.22 to 0.33x. While not precarious, these ratios suggest that CBSH is somewhat conservative with its payouts, potentially retaining more cash for growth or as a buffer against uncertain economic conditions. This trend is moderately healthy, showing capacity to cover dividends but also highlighting susceptibility to cash flow volatility in some years.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over a span of 20 years indicate a company's consistent ability to generate profits and distribute them to shareholders, reassuring income-seeking investors.

Commerce Bancshares has demonstrated a remarkable history of stable and growing dividends over the past 20 years. From 2003 to 2023, the dividend per share has seen a consistent upward trajectory, without any significant drops exceeding 20%. For instance, the dividend per share increased from 0.4196 in 2003 to 1.0284 in 2023, despite minor fluctuations. This trend underscores CBSH's financial stability and commitment to rewarding its shareholders, making it a favorable choice for income-focused investors. In none of the observed years did the dividend per share drop by more than 20%, solidifying its reputation as a stable dividend payer.

Dividends Paid for Over 25 Years?

Explain the criterion for Commerce Bancshares (CBSH) and why it is important to consider

Dividends Paid for Over 25 Years:

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Commerce Bancshares (CBSH) and why it is important to consider

Reliable Stock Repurchases Over the Past 20 Years and its impact on shareholders