Banking On CIBC With A Strong Buy Recommendation

| About: Canadian Imperial (CM)

Summary

CIBC is an attractive investment through its dividend payouts, steady profits and increasing dividends payouts.

A possible share price split will make CIBC more attractive to retail shareholders.

Canaccord places an attractive target price on CIBC representing further upside in the share price.

The Canadian Imperial Bank of Commerce (NYSE:CM) currently offers its shareholders a rock steady dividend, providing a yield around 4%, payable on a quarterly basis. Shares in CIBC have steadily been appreciating year after year, excluding the global financial crisis of 2008-09. A quick review of its decade stock chart will show that investors have been handsomely rewarded with a 90% plus growth through share price appreciation. Those who bought during the 2008-2008 global financial crises have seen a double in the past five years. Not only has it paid a steady quarterly cash dividend and grown its stock price but it has also increased the dividend payout. In 2006, it was paying a quarterly payment of .77/per share, today it is paying .98/per share representing a 27% increase in dividend payout within 8 years. This equates into more than a 3% annual increase in dividends, an ideal situation for long-term shareholders looking for cash flow and income from dividend distributions. Even for those investors who bought prior to the 2008-2009 global financial crises are nearly at breakeven and have collected a steady dividend in the intern. It is clear that buying shares in CIBC over the past decade caused no harm to CIBC.

Pulling the chart back even further to the late 1990s, you will see that CIBC traded at significantly lower prices in the $20/share range. Dividends issued during the late 1990s were still providing steady annual yields in the 2.5-4% range. There is some speculation and expectation that CIBC will complete a share stock split. Stock splits generally involve a company dividing its existing shares into a greater number of shares. The goal is to make the common shares of the company more appealing to existing and new retail investors. It also provides greater trading liquidity for institutional investors. CIBC has completed three stock splits in its history including:

March 27, 1997

Two for one (by way of a 100% stock dividend)

January 31, 1986

Two for one

August 9, 1967

Five for one

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Toronto Dominion Bank (NYSE:TD) a comparable bank to CIBC, has completed double the number of stock splits in its history. Most recently, TD completed a stock split in Q1 2014 and prior to that was in July 1999. CIBC last completed a stock split in March 1997, just months ahead of TD. Here is the TD share stock split history:

May 31, 19671

5-for-1 Stock Split

December 19, 19752

2-for-1 Stock Split

July 28, 19833

3-for-1 Stock Split

July 31, 19894

1 for 1 Stock Dividend

July 31, 19995

1 for 1 Stock Dividend

January 31, 20146

1 for 1 Stock Dividend

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Currently, CIBC is trading just shy of $90/share which is the same price range when National Bank of Canada (OTCMKTS:OTCPK:NTIOF) and TD completed stock splits. A key development for CIBC was an announcement that CIBC's CEO will retire in 2016. It is rational to think that the outgoing or incoming CEO or the Board of Directors would make the decision to complete a stock split to complete or begin their terms with the company.

In February 2014, CIBC posted a net profit of C$1.18 billion ($1.08 billion U.S.), or C$2.88 a share ($2.64 U.S.), from C$785 million ($719.85 million U.S.) or C$1.88 a share. The company is now in the final running to purchase Russell Investments, a U.S. money manager that is up for sale with a price tag of as much as $3 billion. It is reported that CIBC is open to buying all of Seattle-based Russell, which runs about $250 billion of assets.

So what does the street in Canada think about CIBC? A recent article published in the Globe and Mail highlighted a number of analysts that cover CIBC. Mr. Gabriel Dechaine, an analyst with Canaccord, placed a target of $105 on CIBC representing over 10% appreciation in its share price based on current levels. With strong earnings, a solid dividend track record with a growing dividend, and further upside in its share price, it is without a doubt that CIBC should be included in every investor's portfolio. It is also fair to say that CIBC is well primed for a stock split which will make it a more attractive for retail shareholders.

Disclosure: I am long CM, TD, NTIOF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.