Dividend Kings In Focus: Commerce Bancshares

Up to date on July eighth, 2025 by Felix Martinez

The Dividend Kings are an unique group of dividend shares that fulfill our most stringent standards for dividend historical past.

Particularly, every Dividend King has elevated its dividend for 50 consecutive years. You’ll be able to see the complete checklist of all 55 Dividend Kings right here.

We now have created a complete, downloadable checklist of all Dividend Kings, together with key monetary metrics resembling price-to-earnings ratios and dividend yields. You’ll be able to obtain your copy of the Dividend Kings checklist by clicking on the hyperlink beneath:

Commerce Bancshares (CBSH) is one instance of a slow-and-steady Dividend King. Nonetheless, the corporate flies below the radar of many dividend progress buyers as a result of its present market capitalization is slightly below $9 billion.

This text will look at Commerce Bancshares’ funding enchantment by contemplating its enterprise mannequin, progress prospects, and anticipated returns.

Enterprise Overview

Commerce Bancshares’s enterprise mannequin is straightforward to know. It’s a financial institution holding firm whose principal subsidiary is Commerce Financial institution.

Supply: Investor Presentation 

Commerce Financial institution presents a variety of basic banking companies to each retail and enterprise prospects, together with retail and company banking, in addition to asset administration and funding banking. Commerce Financial institution was based in 1865 and operates branches within the following states:

• Colorado
• Missouri
• Kansas
• Illinois
• Oklahoma

Commerce Bancshares, Inc. reported Q1 2025 web revenue of $131.6 million, up 16.8% from $112.7 million in Q1 2024, with diluted EPS rising 19.5% to $0.98 from $0.82. Whole income grew 7.6% to $428.1 million from $397.8 million, pushed by web curiosity revenue of $269.1 million (up 8.1%) and non-interest revenue of $158.9 million (up 6.8%), led by a ten.7% enhance in belief charges to $57.0 million. Non-interest bills fell 3.0% to $238.4 million, bettering the effectivity ratio to 55.6% from 61.7%. The web yield on interest-earning belongings elevated by 7 foundation factors to three.56%, with a return on common belongings of 1.69% and a return on common fairness of 15.82%.

Key metrics included common loans up 1.0% to $17.2 billion and whole belongings up 1.2% to $32.4 billion. Common deposits dipped 0.3% to $25.8 billion, with the common price on interest-bearing deposits down 15 foundation factors to 1.72%. Non-accrual loans remained low at 0.13% of whole loans, with the allowance for credit score losses at 0.96%. Funding securities good points/losses shifted to a $7.6 million loss from a $0.3 million loss. The efficient tax price was regular at 21.93%.

The corporate didn’t present particular 2025 steering however emphasised resilience amid financial uncertainties. A $0.275 per share dividend was accepted, payable in Q2 2025, reflecting a 7% enhance over Q1 2024. CEO John Kemper highlighted sturdy execution, sturdy credit score high quality, and capital/liquidity power, positioning Commerce for sustained worth supply regardless of tariff and market challenges.

Development Prospects

Commerce Bancshares has a stable, if unspectacular, progress observe file. Since 2008, the financial institution has elevated its earnings per share by 7.9% per 12 months.

Commerce Bancshares’ progress prospects have remained comparatively unchanged during the last decade. The financial institution’s progress continues to be depending on many components.

First, the online curiosity margin represents the unfold between the rates of interest it pays on its deposits and the rates of interest it earns on its loans. The rise in rates of interest has typically been a optimistic tailwind for the nation’s banks, as their web curiosity margin has expanded.

Mortgage progress is one other approach to develop income. The corporate has steadily grown its mortgage portfolio prior to now 5 years.

Supply: Investor Presentation 

General, we consider the corporate will possible replicate its historic progress shifting ahead; nonetheless, we’ve got lowered our forecast for earnings-per-share progress to five% over the following half-decade.

Aggressive Benefits & Recession Efficiency

Commerce Bancshares is a well-run financial institution that gives a significant aggressive benefit. The corporate has sturdy fundamentals. This contains an above-average return on fairness, which was 14% earlier than the pandemic. In the latest quarter, the ROE was 16.5%. That is fairly engaging versus the ROEs that a lot of its friends obtain.

Commerce Bancshares’ capitalization can be wholesome, with a tier 1 leverage ratio of 14.8%. The corporate’s credit score high quality is powerful, as web charge-offs are beneath common in comparison with most friends.

Commerce Bancshares carried out exceptionally nicely over the last recession in comparison with its friends within the lending business. The corporate’s earnings trajectory throughout the 2007 to 2009 monetary disaster is proven beneath:

• 2006 adjusted earnings-per-share: $1.72
• 2007 adjusted earnings-per-share: $1.65
• 2008 adjusted earnings-per-share: $1.52
• 2009 adjusted earnings-per-share: $1.33
• 2010 adjusted earnings-per-share: $1.71
• 2011 adjusted earnings-per-share: $2.00

Commerce Bancshares’ adjusted earnings-per-share declined by 19.4% peak-to-trough throughout the worst of the Nice Recession, a time when many bigger lenders executed recapitalization applications that have been devastating to persevering with shareholders.

Maybe extra importantly, Commerce Bancshares continued its multi-decade streak of consecutive dividend will increase. This compares favorably to so many monetary establishments that have been compelled to chop their dividends throughout this era. Due to this, we consider the corporate will carry out very nicely throughout any future financial downturns.

Valuation & Anticipated Returns

As with all widespread equities, Commerce Bancshares’ future returns may be estimated by inspecting every of the three key contributors to returns: dividends, earnings progress, and adjustments in valuation.

Dividend funds are essentially the most predictable contributor to whole returns. Commerce Bancshares inventory at the moment has a dividend yield of 1.7%. Commerce Bancshares has raised its dividend for 57 consecutive years.

Earnings-per-share progress is the second-most predictable supply of returns. All through full financial cycles, we anticipate 5% annual earnings progress.

Lastly, future returns are decided partly by adjustments within the valuation a number of. Commerce Bancshares is predicted to earn $4.15 per share in 2025. Which means that the inventory is buying and selling at a price-to-earnings ratio of 15.6. The longer-term median earnings a number of is within the mid-teens, however we consider that shares could be pretty valued at a price-to-earnings a number of of 12.

This would scale back the corporate’s returns by 5.5% yearly if the corporate’s valuation have been to contract from 15.6 instances earnings to 12 instances earnings over the following 5 years.

Subsequently, whole returns would include the next:

• 5% earnings progress
• 1.8% dividend yield
• -5.5% a number of reversion

Commerce Bancshares is predicted to ship a complete annual return of 1.3% by way of 2030. As a consequence of this excessive valuation, the financial institution at the moment earns a promote advice from Certain Dividend.

Ultimate Ideas

Commerce Bancshares has a dividend historical past that few corporations within the monetary companies business can match. Sadly, the corporate’s valuation is even richer than its dividend historical past. We suspect that valuation contraction might be a unfavourable contributor to Commerce Bancshares’ future returns.

The inventory has a valuation that’s barely larger than our goal, however the financial institution is predicted to provide stable earnings progress. Commerce Bancshares additionally has an extended historical past of dividend progress; nonetheless, we encourage buyers to attend for a extra favorable entry level earlier than buying this Dividend King.

Moreover, the next Certain Dividend databases include essentially the most dependable dividend growers in our funding universe: