Buying Opportunity: This Bank Can Do No Wrong!

Impressive results and a generous dividend hike continue to showcase why Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) remains a top-pick for growth and income-seeking investors.

| More on:

If you were to sit down two years ago and consider the future growth prospects of Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), you would have likely come to the conclusion that the bank was an acceptable investment, but not exactly a great long-term pick with a flashing “Buy now!” sign over it.

How far CIBC has come in two years

One of the common criticisms just a few years ago was that CIBC lacked any real growth prospects outside Canada. The bank had mostly exited the U.S. market nearly a decade ago and was sitting relatively still, while its peers were gobbling up banks and staking claims over the lucrative U.S. market, or abroad into other other markets.

Part of the concern among investors was that CIBC was overly exposed to Canada’s white-hot real estate market, and without diversifying into other markets, the bank could be in a difficult position if the market position changed.

Fortunately, that view changed drastically when CIBC announced a series of huge acquisitions in relatively quick succession. First, there was the huge acquisition of Chicago-based PrivateBancorp in a US$3.8 billion deal, which was completed last summer. Last year also saw CIBC acquire the private wealth-management firm Geneva Advisors for US$200 million. Geneva was also based out of Chicago, which meant that the company could add US$8.6 billion in assets under management, with a strong and growing foothold in the U.S. under its rebranded name in that market, CIBC Bank USA.

Both deals gave CIBC a welcome boost to earnings and silenced critics.

Recent results reveal CIBC is still a great investment

CIBC announced results for the third quarter last week and it was another stellar quarter.

The bank reported a profit of $1.37 billion in the quarter, surpassing the figure from the same quarter last year by an incredible 25% on a per share basis. The bank earned $3.01 per diluted share, which was also a notable bump over the $2.60 per diluted share reported last year.

Analysts were forecasting CIBC to post a profit of $2.94 per share.

CIBC’s results were not attributed to just one segment of the company, but rather to the stellar performance of the bank across all of its operating segments. The Canadian personal and small business group saw a 14% increase over the same quarter last year to $639 million in earnings, whereas the Canadian commercial banking and wealth management segment saw a 20% uptick over the same quarter last year, coming in at $350 million.

The U.S. commercial banking and wealth management segment brought in $162 million, up by an incredible $121 million over the prior year, clearly reflecting the addition of PrivateBancorp to CIBC’s portfolio.

The impressive quarterly result announcement was followed by an equally impressive hike to the company’s dividend, which will now provide a quarterly payout of $1.36 per share, translating into a very appetizing 4.44% yield.

If there was any doubt that CIBC was not a great long-term investment, it was quashed during the earnings announcement. As it stands now, CIBC is the bank to have if you want growth and income and is likely to continue growing for the foreseeable future.

CIBC currently trades at just below $123 with a P/E of 10.72.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Demetris Afxentiou has no position in any stocks mentioned.  

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »