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Dividend Kings In Focus: Commerce Bancshares


Updated on July 8th, 2025 by Felix Martinez

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

Specifically, each Dividend King has increased its dividend for 50 consecutive years. You can see the full list of all 55 Dividend Kings here.

We have created a comprehensive, downloadable list of all Dividend Kings, including key financial metrics such as price-to-earnings ratios and dividend yields. You can download your copy of the Dividend Kings list by clicking on the link below:

 

Click here to instantly download your free spreadsheet of all Dividend Kings now, along with important investing metrics.

Commerce Bancshares (CBSH) is one example of a slow-and-steady Dividend King. However, the company flies under the radar of many dividend growth investors because its current market capitalization is just under $9 billion.

This article will examine Commerce Bancshares’ investment appeal by considering its business model, growth prospects, and expected returns.

Business Overview

Commerce Bancshares’s business model is easy to understand. It is a bank holding company whose principal subsidiary is Commerce Bank.

Source: Investor Presentation 

Commerce Bank offers a range of general banking services to both retail and business customers, including retail and corporate banking, as well as asset management and investment banking. Commerce Bank was founded in 1865 and operates branches in the following states:

Commerce Bancshares, Inc. reported Q1 2025 net income 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. Total revenue grew 7.6% to $428.1 million from $397.8 million, driven by net interest income of $269.1 million (up 8.1%) and non-interest income of $158.9 million (up 6.8%), led by a 10.7% increase in trust fees to $57.0 million. Non-interest expenses fell 3.0% to $238.4 million, improving the efficiency ratio to 55.6% from 61.7%. The net yield on interest-earning assets increased by 7 basis points to 3.56%, with a return on average assets of 1.69% and a return on average equity of 15.82%.
Key metrics included average loans up 1.0% to $17.2 billion and total assets up 1.2% to $32.4 billion. Average deposits dipped 0.3% to $25.8 billion, with the average rate on interest-bearing deposits down 15 basis points to 1.72%. Non-accrual loans remained low at 0.13% of total loans, with the allowance for credit losses at 0.96%. Investment securities gains/losses shifted to a $7.6 million loss from a $0.3 million loss. The effective tax rate was steady at 21.93%.
The company did not provide specific 2025 guidance but emphasized resilience amid economic uncertainties. A $0.275 per share dividend was approved, payable in Q2 2025, reflecting a 7% increase over Q1 2024. CEO John Kemper highlighted strong execution, robust credit quality, and capital/liquidity strength, positioning Commerce for sustained value delivery despite tariff and market challenges.

Growth Prospects

Commerce Bancshares has a solid, if unspectacular, growth track record. Since 2008, the bank has increased its earnings per share by 7.9% per year.

Commerce Bancshares’ growth prospects have remained relatively unchanged over the last decade. The bank’s growth continues to be dependent on many factors.

First, the net interest margin represents the spread between the interest rates it pays on its deposits and the interest rates it earns on its loans. The rise in interest rates has generally been a positive tailwind for the nation’s banks, as their net interest margin has expanded.

Loan growth is another way to grow revenue. The company has steadily grown its loan portfolio in the past five years.

Source: Investor Presentation 

Overall, we believe the company will likely replicate its historical growth moving forward; however, we have lowered our forecast for earnings-per-share growth to 5% over the next half-decade.

Competitive Advantages & Recession Performance

Commerce Bancshares is a well-run bank that provides a meaningful competitive advantage. The company has strong fundamentals. This includes an above-average return on equity, which was 14% before the pandemic. In the most recent quarter, the ROE was 16.5%. This is quite attractive versus the ROEs that many of its peers achieve.

Commerce Bancshares’ capitalization is also healthy, with a tier 1 leverage ratio of 14.8%. The company’s credit quality is strong, as net charge-offs are below average compared to most peers.

Commerce Bancshares performed exceptionally well during the last recession compared to its peers in the lending industry. The company’s earnings trajectory during the 2007 to 2009 financial crisis is shown below:

Commerce Bancshares’ adjusted earnings-per-share declined by 19.4% peak-to-trough during the worst of the Great Recession, a time when many larger lenders executed recapitalization programs that were devastating to continuing shareholders.

Perhaps more importantly, Commerce Bancshares continued its multi-decade streak of consecutive dividend increases. This compares favorably to so many financial institutions that were forced to cut their dividends during this period. Because of this, we believe the company will perform very well during any future economic downturns.

Valuation & Expected Returns

As with all common equities, Commerce Bancshares’ future returns can be estimated by examining each of the three key contributors to returns: dividends, earnings growth, and changes in valuation.

Dividend payments are the most predictable contributor to total returns. Commerce Bancshares stock currently has a dividend yield of 1.7%. Commerce Bancshares has raised its dividend for 57 consecutive years.

Earnings-per-share growth is the second-most predictable source of returns. Throughout complete economic cycles, we expect 5% annual earnings growth.

Lastly, future returns are determined in part by changes in the valuation multiple. Commerce Bancshares is expected to earn $4.15 per share in 2025. This means that the stock is trading at a price-to-earnings ratio of 15.6. The longer-term median earnings multiple is in the mid-teens, but we believe that shares would be fairly valued at a price-to-earnings multiple of 12.

This would reduce the company’s returns by 5.5% annually if the company’s valuation were to contract from 15.6 times earnings to 12 times earnings over the next five years.

Therefore, total returns would consist of the following:

Commerce Bancshares is expected to deliver a total annual return of 1.3% through 2030. Due to this high valuation, the bank currently earns a sell recommendation from Sure Dividend.

Final Thoughts

Commerce Bancshares has a dividend history that few companies in the financial services industry can match. Unfortunately, the company’s valuation is even richer than its dividend history. We suspect that valuation contraction will be a negative contributor to Commerce Bancshares’ future returns.

The stock has a valuation that is slightly higher than our target, but the bank is expected to produce solid earnings growth. Commerce Bancshares also has a long history of dividend growth; however, we encourage investors to wait for a more favorable entry point before purchasing this Dividend King.

Additionally, the following Sure Dividend databases contain the most reliable dividend growers in our investment universe:

Thanks for reading this article. Please send any feedback, corrections, or questions to support@suredividend.com.



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