Finding a dividend stock that not only provides a high yield but also consistently outperforms the market is not an easy task. Identifying such opportunities on the Toronto Stock Exchange can significantly enhance your portfolio’s performance in the long run, providing both steady income and capital appreciation.
While many dividend stocks offer attractive yields, they fail to deliver consistent returns or growth. However, there is one dividend stock that stands out from the crowd and has beaten the TSX Composite benchmark in the last year. That stock is Canadian Imperial Bank of Commerce (TSX:CM). In this article, I’ll highlight why CM stock could prove to be one of the best bank stocks to hold for the long term and what could help its share prices continue to rise, making it a standout choice for dividend-seeking investors.
Canadian Imperial Bank stock
Based on its market cap of $64.9 billion, the Canadian Imperial Bank of Commerce is currently the fifth-largest bank in Canada. After rallying by nearly 19% in the last year, this top bank stock currently trades at $68.67 per share and offers an attractive 5.2% annualized dividend yield. As one of the “Big Five” banks in Canada, it provides a wide range of financial products and services both domestically and internationally (especially in the United States), focusing on customer-centric banking solutions designed to meet the diverse needs of its clients.
In the second quarter (ended in April) of its fiscal year 2024, Canadian Imperial Bank’s YoY (year-over-year) revenue growth rate accelerated to 8.1% from around 5% in the previous quarter, with the help of a series of robust performances across various segments. The bank’s adjusted net quarterly profit also climbed by 5% YoY to $1.7 billion, underscoring its resilient operational capabilities and strategic focus as its core business areas contributed significantly to these strong results.
What could drive this dividend stock higher in the near future?
Now, let me quickly give you a rough idea about the strength of Canadian Imperial Bank’s long-term financial growth trends. Despite facing pandemic-driven operational challenges in between, the bank’s revenue rose 31% in the five years between its fiscal year 2018 and 2023 (ended in October 2023). Although global pandemic-related costs affected its bottom line, it still managed to achieve an attractive 10% adjusted earnings growth in these five years.
In addition to its strong fundamental position, another key factor that could drive a strong rally in CM stock in the near term is the recent shift in the Bank of Canada’s monetary policy. In June 2024, the central bank decided to slash interest rates for the first time in more than four years as inflationary pressures have already started showing signs of sustainable easing.
Lower interest rates tend to boost the demand for consumer as well as business loans, which could benefit Canadian Imperial Bank’s core banking operations in the coming quarters. Moreover, the bank’s diversified business model, with exposure to capital markets, wealth management, and insurance segments, could help it mitigate the risks associated with any one segment, making it a very attractive dividend stock to buy now.
