CIBC Offers Canada’s Best Bank Dividend

One of the downfalls with the recent move in North American banks is their dividend yields are becoming more depressed. It used to be easy to get 4% yields from Canada’s largest banks. It’s almost impossible now.
There’s only one major Canadian bank that still offers a yield higher than 4%, which is Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM). After today’s dividend increase, shares yield 4.3%.
Many investors are nervous about CIBC because the bank is the most Canada-centric of the five major Canadian banks. All of its peers have major operations abroad -- mostly in the United States. CIBC doesn’t, although it is trying to change that.

It proposed buying Chicago-based PrivateBancorp in June. That deal is still waiting for shareholder approval, with some analysts speculating PrivateBancorp shareholders may ask for a higher price.

Operations at home in Canada are doing just fine. CIBC posted quarterly earnings of $2.89 per share, easily beating analyst expectations of $2.59 per share. Analysts project earnings will hit $10.22 per share in 2017, putting shares at less than 12 times forward earnings. That’s more expensive than a year ago, but is still cheap versus peers.
It also puts the company’s payout ratio at under 50% of forward earnings, which is exactly what dividend investors want to see.
There aren’t many stocks that yield more than 4% that have a demonstrated history of dividend growth. CIBC is one of the few that tick off both boxes. At some point won’t trade at the lowest valuation of its peers, either.