Commerce Bancshares, Inc.'s (NASDAQ:CBSH) dividend will be increasing from last year's payment of the same period to $0.275 on 25th of March. Even though the dividend went up, the yield is still quite low at only 1.5%.

See our latest analysis for Commerce Bancshares

Commerce Bancshares' Earnings Will Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Commerce Bancshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Commerce Bancshares' last earnings report, the payout ratio is at a decent 27%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 27.8% over the next 3 years. Analysts forecast the future payout ratio could be 31% over the same time horizon, which is a number we think the company can maintain.

Commerce Bancshares Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.526 in 2015, and the most recent fiscal year payment was $1.03. This implies that the company grew its distributions at a yearly rate of about 6.9% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Commerce Bancshares Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Commerce Bancshares has grown earnings per share at 6.9% per year over the past five years. Commerce Bancshares definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Commerce Bancshares' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Commerce Bancshares that investors need to be conscious of moving forward. Is Commerce Bancshares not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.