Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Canadian Imperial Bank in Focus

Based in Toronto, Canadian Imperial Bank (CM) is in the Finance sector, and so far this year, shares have seen a price change of -5.52%. Currently paying a dividend of $0.69 per share, the company has a dividend yield of 4.59%. In comparison, the Banks - Foreign industry's yield is 3.79%, while the S&P 500's yield is 1.55%.

In terms of dividend growth, the company's current annualized dividend of $2.74 is up 3.3% from last year. Canadian Imperial Bank has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 4.91%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Canadian Imperial Bank's current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.

CM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $5.65 per share, which represents a year-over-year growth rate of 3.86%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that CM is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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Canadian Imperial Bank of Commerce (CM) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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