Commerce Bancshares (NASDAQ:CBSH) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy Commerce Bancshares, Inc. (NASDAQ:CBSH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Commerce Bancshares' shares before the 3rd of September to receive the dividend, which will be paid on the 23rd of September.

The company's next dividend payment will be US$0.26 per share, and in the last 12 months, the company paid a total of US$1.05 per share. Based on the last year's worth of payments, Commerce Bancshares has a trailing yield of 1.5% on the current stock price of $70.92. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Commerce Bancshares has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Commerce Bancshares

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Commerce Bancshares has a low and conservative payout ratio of just 22% of its income after tax.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Commerce Bancshares's earnings per share have risen 18% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Commerce Bancshares has delivered an average of 6.7% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Should investors buy Commerce Bancshares for the upcoming dividend? Companies like Commerce Bancshares that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Commerce Bancshares more closely.

On that note, you'll want to research what risks Commerce Bancshares is facing. For example - Commerce Bancshares has 1 warning sign we think you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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