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Commerce Bancshares, Inc. CBSH is well-positioned for growth, given the decent loan demand, relatively higher interest rates and its balance sheet repositioning strategy. Moreover, solid liquidity and non-interest income growth will further support its financials.
Here’s What Makes CBSH Stock Worth Betting On
Rising Revenues: Driven by growth in loan demand and fee income, Commerce Bancshares’ total revenues witnessed a compound annual growth rate (CAGR) of 4.2% over the last five years (2019-2024).
Revenue Trend
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Further, relatively higher interest rates will likely support CBSH’s net yield on interest-earning assets and net interest income (NII), although rising funding costs will weigh on both. In May 2024, the company announced a balance sheet repositioning strategy, which will continue to bolster its NII. Under this, the company sold its debt securities and reinvested the proceeds at higher yields.
CBSH’s NII and loans reflected a CAGR of 4.8% and 2.2%, respectively, over the last five years. Further, the company’s net yield on interest-earning assets expanded to 3.47% in 2024 from 3.16% in 2023 and 2.85% in 2022, driven by higher rates.
Decent loan demand, solid fee income and a higher-for-longer interest-rate scenario are likely to support top-line expansion in the upcoming period, though rising funding costs will weigh on it to some extent.
Sales Estimates
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Encouraging Capital Distributions: As of Dec. 31, 2024, CBSH’s total cash and cash equivalents (consisting of cash and due from banks and interest-earning deposits with banks) were $3.4 billion. Total debt (comprising other liabilities and other borrowings) was $443.8 million.
Also, the company maintains investment-grade ratings of A- and a stable outlook from Standard & Poor’s. This renders the company favorable access to the debt market. Thus, given its decent earnings strength and a solid liquidity position, Commerce Bancshares will likely be able to address debt obligations in the near term, even if the economic situation worsens.
Moreover, the company has been paying a 5% stock dividend over the past 25 years, with the most recent one announced in October 2024. The company has been consistently paying quarterly cash dividends. It has increased its dividend seven times in the past five years with a dividend payout ratio of 27%. Also, based on CBSH’s closing price of $62.27 on March 27, 2025, its dividend yield is 1.77%.
Dividend Yield
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