1 Magnificent Dividend Stock That’s Down 21% and Trading at a Once-in-a-Decade Valuation
STACKED COINS DEPICTING MONEY GROWTH
When looking for a magnificent dividend stock, some of the best and most stable options have included the Big Six Banks. These banks have proven time and again that they can come back from pretty much any downturn. And yet, some continue to trade in value territory.
One of these dividend stocks include Canadian Imperial Bank of Commerce (TSX:CM). In fact, the stock is currently trading at a once-in-a-decade valuation! So letâs look at why it could be a strong purchase today.
Down, not out
Shares of CIBC stock are near 52-week highs, so you wouldnât be blamed for being a bit confused when it comes to questioning how itâs down 21%. That number comes from all-time highs, adjusted for the stock split.
In this case, CIBC stock is down 21% from the highs reached back in 2021. Whatâs more, though, the stock continues to trade at a very valuable price-to-earnings (P/E) ratio. The P/E ratio tells us the valuation of a company’s stock. A high P/E ratio might indicate that investors are expecting high growth rates in the future, while a low P/E ratio might suggest undervaluation.
In the case of CIBC stock, the dividend stock currently has a P/E ratio of 9.9. When looking at the last decade, the only other time it has been below that number was during the pandemic crash, and when the market fell back in 2022. Since then, there has been a recovery, which could mark the beginning of a new climb.
Earnings give us clues
Earnings are on deck soon for the bank stocks, and CIBC is included. The key here is seeing whether the dividend stock can continue to show that itâs growing, despite the ongoing issues with interest rates and housing.
CIBC has long been knocked for being too heavily invested in the Canadian market. This includes Canadian housing, which makes them vulnerable to loan losses. However, the company is also known for its client retention and bringing more clients on board. This has led to strength in the last few quarters.
With second quarter earnings coming up, we can look at the kind of momentum CIBC stock has achieved over the last year. During the third quarter, revenue hit $5.85 billion with net income of $1.43 billion. By the fourth quarter revenue had come down to $5.84 billion, while net income rose to $1.48 billion. Yet in the first quarter, CIBC stock surged as it reported revenue of $6.22 billion and net income at $1.73 billion.
Bottom line
With this momentum underway, and cautious optimism about the future, CIBC stock looks highly valuable. The stock trades well below the average P/E ratio of the last year. Furthermore, itâs still down 21% from all-time highs. Finally, you can grab a dividend at 5.56% as of writing, all while seeing the dividend stock rise higher. So if there is one dividend stock to consider on the TSX today, I would certainly keep an eye on CIBC stock.
Should you invest $1,000 in CIBC right now?
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Fool contributor Amy Legate-Wolfe has positions in Canadian Imperial Bank of Commerce. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.