Despite the market performing quite poorly these days, it must be said that we have yet to actually enter a recession. Though the recession phrase is tossed around a lot these days, it has yet to arrive. That means there is still time to prepare. And that’s exactly what I’ve been doing with this dividend stock.
Finding the right one
I, of course, invest in a fair bit, ranging from conservative, long-term growth options to more riskier choices. This dividend stock falls right in the middle. While it’s down right now, I believe it’s a great option for long-term protection — especially when we enter a recession.
That’s because this dividend stock is a Dividend Aristocrat and trades at quite a valuable share price. Further, it offers a high dividend yield that I’ll continue to collect while I wait for shares to recover.
And they will recover. How do I know? Because this company has been through recessions and downturns for decades, and each time comes back swinging. That means I can continue to drip-feed into it, collect more passive income, and look forward to even more decades of growth.
So, which dividend stock is it?
If there’s one dividend stock I’m going to continue drip-feeding into these days, I’d say Canadian Imperial Bank of Commerce (TSX:CM) is right up there. CIBC stock is a dividend stock in the banking industry. Granted, this is an industry that’s simply not doing well right now. However, that won’t be the case forever.
There is a huge difference between Canadian banks and American banks, for one. American banks survive through competition. There are so many out there, each competing and investing in businesses rather than putting money aside to help during a downturn. That’s where Canadian banks are different. With less competition, there is more stable income coming in.
CIBC stock, as with the other banks, can therefore afford to put aside provisions for times such as these — times when loans come in at a loss, and we see shares fall off the face of the earth. However, it can use these provisions to come back strong, which is what it’s done again and again.
Locking up a strong yield
This is why I continue to invest in this dividend stock time and again. Sure, CIBC stock is down 28% in the last year as of writing. But that has surged its dividend yield to 5.99%, which is pretty much unheard of these days among the banks.
To show you how big of a difference this can make, let’s look at how much passive income you would be making if you had purchased the same amount each month over the last six months.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| CM-Oct | $56 | 9 | $3.40 | $30.60 | Quarterly | $500 |
| CM-Nov | $64 | 8 | $3.40 | $27.20 | Quarterly | $500 |
| CM-Dec | $54 | 9 | $3.40 | $30.60 | Quarterly | $500 |
| CM-Jan | $59 | 8 | $3.40 | $27.20 | Quarterly | $500 |
| CM-Feb | $61 | 8 | $3.40 | $27.20 | Quarterly | $500 |
| CM-Mar | $56 | 9 | $3.40 | $30.60 | Quarterly | $500 |
Bottom line
By drip feeding, three of the months I invested in brought in far more than the other three months where shares were higher. I’ve now locked in more income with the knowledge that CIBC stock will eventually return to 52-week highs. Meanwhile, in the last six months alone, I’ve brought in passive income of $173.40 so far for the year from a $3,000 investment. And then, it’s up from there.
