Welcome to this series where I will be reviewing all the Dividend Kings and providing an overview and valuation calculation on the companies. Dividend Kings are a rare breed of Dividend Growth Companies. These companies have managed to raise their dividend for 50 or more years consecutively. Through all types of market swings, economic trouble, wars, and recessions, these companies have seen it all and continue to reward shareholders with rising dividend income.
This week’s entry will focus on:
CBSH – Commerce Bankshares, Inc.
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Overview
Commerce Bancshares is based in Missouri and operates in approximately 300 branch and ATM locations across Missouri, Kansas, Illinois, Oklahoma and Colorado. The company offers a diversified line of financial services, including business and personal banking, wealth management and estate planning and investments.
The company was started in 1865 and per their website has been ranked as one of the World’s Best Banks, Best Bank in America, and one of America’s Best Midsize Employers.
(Source: Company Website)
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Metrics:
Dividend Amount: $1.05
Dividend Yield: 1.44%
5 Year Dividend CAGR: 10.73%
Dividend Payout Ratio: 24.36%
Years of Dividend Increases: 54 Years
EPS: $4.31
P/E: 18.23
Book Value Per Share: $24.49
P/B: 2.56
Analyst 5 Year Earnings Growth Estimate: -3.09%
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Valuation:
Current Price: $72.98 (4/21/22)
DCF (10% RRR): $42.02
P/E Mean Reversion:$79.17
P/B Mean Reversion: $58.16
Dividend Yield Theory: $68.63
Average of the four: $61.99
Analyst 1 year Price Target: $77.33
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Commentary:
CBSH is a $8.84b by market cap super-regional bank in the midwest United States and serves the local communities in retail and business banking. The small size of the company and the highly competitive banking market makes it hard for the company to gain market share and expand operations and revenue.
The stock has provided solid long term returns but the past 5 year price appreciation has only been 53.69% compared to the S&P 500 return of 87.07%. The current dividend yield is close to their historical average and their dividend growth of 10.77% meets my ideal threshold of current yield + dividend growth rate equal to 12. The company has very slow top and bottom line growth and analysts are predicting negative growth going forward. The dividend history of 54 years of consecutive growth shows a stable business model but little growth is expected in the next few years. Small regional banks such as CBSH will likely have to consolidate or risk being acquired in my opinion as the banking industry is very competitive. The company has a history of being the acquirer of smaller community banks.
The stock appears fully valued to overvalued at this time and with limited to negative growth ahead, waiting for a pullback may be needed before purchase.
Disclosure: I do not own shares of CBSH.