Investors looking for dividends might be tempted to look at the highest yield to maximize their payouts. However, the danger with that is that a high yield may not be sustainable or the stock may have come crashing down, which sent the yield up. Either case would create concern for investors and might make the stock unappealing.
Buying a dividend stock that grows could be a great investment if the company continues to increase payouts. After all, a dividend yield is just what you would be making today, based on today’s stock price. If a company grows its payouts then that yield effectively increases.
Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) currently pays investors a dividend of 4.5%. What’s appealing about this stock is that it presents investors with a stable option to earn a growing dividend. Bank stocks are one of the safest places investors can put their money and a growing dividend will help increase returns over time.
In five years the CIBC has grown its quarterly payment from $0.94 to $1.30, for an increase of 38%. If the bank were to maintain this level of growth then it would take less than 11 years for dividend payments to double. Although the current yield is 4.5% today, investors could see dividend payments making up a much higher percentage of their investment years down the road, just for holding the stock.
In addition to dividend growth, investors will likely benefit from capital appreciation as the bank continues to grow its sales and profits.