Strong, growing, healthy dividends and growing balance sheets have made Canada’s big banks solid options for investors. Chief among those banks is Canadian Imperial Bank of Commerce (TSX: CM)(NSYE:CM), which offers a compelling investment case for investors that are looking for growth and income-producing opportunities.
Here’s a look at how CIBC differs from its peers and why you may want to consider investing in the fifth-largest bank in the country.
CIBC finally stretched its muscle, and everyone took note
One of the first things that potential investors should take note of is how CIBC has shed its reputation of being the smaller, more muted member of the Big Five club over the past few years. In the years following the Great Recession, many of CIBC’s peers focused on expanding into foreign markets, particularly into the U.S. (with one notable exception), but CIBC turned towards the domestic market, becoming one of the largest players on the market to capitalize on the housing boom that followed.
The strategy worked, but concerns started to emerge relating to how little diversified CIBC was to offset any slowdown in the domestic real estate market. Once CIBC finally came around to acquire PrivateBancorp in 2017, the landscape was changed forever. Besides the obvious re-entry into the U.S. market (which CIBC had exited nearly a decade prior), the massive loan deposits and higher interest rates were a boon to the bank during earnings season.
Shortly after the acquisition, CIBC noted that the goal was to have just shy of one-fifth of earnings stem from the U.S. market by 2020. The bank appears to be approaching that goal, as in the most recent quarter the U.S. Commercial Banking and Wealth Management segment realized net income of $168 million, reflecting just over 14% of the $1,182 million in net income the bank reported in the quarter. The segment also saw an impressive 25% year-over-year gain over the same period last year, which was attributed to higher revenues.
CIBC offers a compelling dividend
One of the many reasons that investors flock to Canada’s big banks are the dividends offered. In the case of CIBC, the bank offers an attractive 4.96% yield. CIBC has maintained a series of annual or better upticks stemming back nearly a decade, the most recent of which was announced earlier this year.
In addition to offering what is currently the highest yield among the big banks, CIBC also benefits from coming in from a value standpoint. Like most of the market, the stock is up into double-digit territory so far in 2019, but looking back over a longer period, the bank is barely breaking even on price over the trailing 12-month period, while over a longer two-year period, CIBC is actually down over 5%.
Factor in a current P/E of 10.01, and you not only have a mouthwatering dividend pick that is set to see further growth but a great overall investment that is priced at a discount.
In my opinion, CIBC should rank high up on any investor’s shortlist for long-term growth and income-producing picks.
