CIBC: Stable And Safe With A 5% Yield

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) generates stable earnings, which translates to a stable stock most of the time. Stable earnings coupled with a sustainable payout ratio makes CIBC’s current yield of 5% solid.

CIBC’s stock often gives the notion that it underperforms the other Big Six Canadian banks, but as we shall see, that’s not always the case.

Year-to-date results

In the first nine months of the fiscal year, CIBC reported adjusted earnings per share (“EPS”) of C$9.07, down 1.5% against the comparable period a year ago. These are stable enough earnings and led to a payout ratio of just under 46%. As well, its return on equity fell 2% to 15.8% year over year.

Is CIBC a Buy?

Over the next 3-5 years, the other Big Six Canadian banks are estimated to experience EPS growth that will be more than twice as fast as CIBC’s estimated EPS growth of 2.2%. Therefore, the stock trades at the lowest P/E among the banks for a reason.

It’s best to consider names like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) or National Bank of Canada (TSX:NA) for long-term investment, especially on dips.

However, we’d consider buying CIBC as a trade for quick capital gains (and get the dividend in the interim) whenever it’s too cheap to ignore. At a P/E of ~9.5, we don’t think it’s at that level. (We did buy CIBC in our DGI Across North America service when it fell below C$100 for a quick profit.)

Unfortunately, we have maxed out the word limit for this excerpt. But you can read the Seeking Alpha article (with tables comparing the Big 6 Canadian banks) here: Canadian Imperial Bank Of Commerce: Stable And Safe With A 5% Yield

If you like what you've just read, consider subscribing via the "Subscribe Here" form at the top right so that you will receive an email notification when I publish a new article.

Disclosure: As of writing, we’re long TSX:TD.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

Get Exclusive Articles from me on Seeking Alpha

  • Access my portfolio of high-quality U.S. and Canadian dividend stocks.
  • Real-time updates of when I buy or sell from this portfolio.
  • Get best ideas of the top 3 dividend stocks from my watchlist. Updated each month.
Learn More

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.