The Motley Fool

Why CIBC Stock Is up 38% Year to Date!

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The Big Six banks managed well during the economic crisis yet again. After the pandemic collapse, the stocks crashed with the rest of the market. However, each quickly rebounded to pre-pandemic levels within a year’s time. That included Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM). In fact, CIBC stock is up 38% year to date and 118% since the crash.

Yet, despite being on the back of yet another strong quarter, shares of CIBC stock have suddenly paused in action. So, what’s going on with this top dividend bank stock, and what should Motley Fool investors do?

History in the making

Historically speaking, CIBC stock hasn’t been a favourite. The company is heavily invested in the Canadian market. This leaves it open to fall when the economy crashes, the housing market drops, the oil and gas sector dwindles, and more. And, of course, all of the above have happened lately.

But in the case of the pandemic, the Canadian economy is actually doing fairly well compared to the rest of the world. And a bit part of that was the housing market, which didn’t collapse. Instead, it blossomed! The company recently reported $236 billion in mortgages and another $18.4 billion in home equity lines of credit. With the economy rebounding, low interest rates, and government aid programs continuing, loans are being paid.

And CIBC stock has a diverse portfolio that also includes real estate. So, when the market recovers completely, the company should have a solid portfolio to fall back on — in Canada, at least.

Future funds

So, all this has been great for the present. The company continues to report strong earnings, and mortgages have remained strong. But it seems some Motley Fool investors have begun to worry. Some may fear share growth has peaked, and there could be a turnaround with the economic recovery.

However, CIBC stock has been making some moves recently that may quell those fears. The bank recently acquired the Canadian credit card portfolio for Costco and will be the exclusive credit card issuers for Costco Mastercard in Canada. This should bring in $3 billion in balances, according to a statement.

The company is also going green, investing in renewable energy projects, along with other clean energy assets. It aims to reach net-zero emissions by 2050.

What you get today

So, all that is interesting, but what do Motley Fool investors get when they purchase CIBC stock today? You get a compound annual growth rate (CAGR) of 12.5% as of writing for the last decade. You get the highest dividend yield of the Big Six banks at 3.99% — one that’s likely to jump higher. You get a dividend yield that’s grown at a CAGR of 5.28% in the last decade as well. Finally, you can pick it up during a pullback.

The bank is strong and has solid fundamentals. It currently has a P/E ratio of 11.24, well within value territory, and P/B ratio of 1.6. Meanwhile, analysts give it a potential upside of 10% as of writing for the next year.

CIBC stock is solid and strong. While Motley Fool investors may not see another year of 35% growth or more, you would certainly do well to consider this company as a long-term investment.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Costco Wholesale and Mastercard.

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