Commerce Bancshares: Rich Dividend History, Richer Valuation

The Dividend Kings are an exclusive group of dividend stocks that satisfy our most stringent criteria for dividend history.

More specifically, each Dividend King has increased its dividend for a remarkable 50 consecutive years. You can see the full list of all 26 Dividend Kings here.

Commerce Bancshares (CBSH) is one example of a slow-and-steady Dividend King. With that said, the company flies under the radar of many dividend growth investors because it has a low market capitalization of just $6.5 billion

In this article, we will examine Commerce Bancshares investment appeal by considering its business model, growth prospects, and current valuation in detail.

Business Overview

Commerce Bancshares has an easy-to-understand business model. The company is a bank holding company whose principal subsidiary is Commerce Bank.

CBSH Business Overview


Source: Commerce Bancshares Investor Presentation, slide 3

Commerce Bank offers general baking services to both retail and business customers, with offers ranging from vanilla retail and corporate banking to more exotic offerings like asset management and investment banking. Commerce Bank was founded in 1865 and operates branches in the following states:

  • Colorado
  • Missouri
  • Kansas
  • Illinois
  • Oklahoma

The company is currently headquartered in Kansas City, Missouri.

Recent Financial Performance

Commerce Bancshares delivered strong financial results in the most recent fiscal year. A summary of the bank’s performance can be seen below.

CBSH Strong Financial Performance in 2018


Source: Commerce Bancshares Investor Presentation, slide 5

More recently, Commerce Bancshares’ momentum has continued. The bank generated revenues of $325 million in the first quarter of fiscal 2019, which represents growth of 3.9% over the same period a year ago.

Commerce Bancshares’ revenue growth in the first quarter was driven by growth in its loan portfolio (where commercial loans contributed the largest amount of growth) as well as by expanding net interest margin (net interest margin expanded by 15 basis points year-on-year).

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