Comerica: A High-Yield Dividend Play in a Strategic Merger-Driven Landscape

In a market where income-focused investors are increasingly on the hunt for undervalued dividend stocks, Comerica (CMA) emerges as a compelling candidate. With a market capitalization of $10.9 billion as of September 2025, the regional bank has become a focal point of strategic activity following its pending acquisition by Fifth Third Bancorp. This $10.9 billion all-stock deal, announced on October 6, 2025, not only signals a transformative shift in the regional banking landscape but also positions Comerica as a high-yield, financially robust contender in a sector grappling with regulatory and economic headwinds, according to a TS2 article.

Financial Strength: A Foundation for Stability

Comerica's financial metrics underscore its resilience. The bank reported earnings per share (EPS) of $1.42 in 2025, translating to a trailing P/E ratio of 12.76, according to FullRatio P/E, significantly below the banking sector's average of 14.57. This discount suggests undervaluation relative to peers, particularly when considering its strong capital position. Comerica's Common Equity Tier 1 (CET1) ratio of 11.94%, per Panabee, provides a buffer against potential earnings volatility, while its liquidity-$5.6 billion in cash and equivalents and $29.3 billion in undrawn credit facilities-ensures operational flexibility.

Debt management is another strength. While the debt-to-equity ratio stood at 0.84 as of June 2025, this figure has trended downward from a peak of 12.40 in late 2023, reflecting disciplined deleveraging. Fitch Ratings affirmed Comerica's 'A-' long-term issuer default rating in September 2025, with a stable outlook, a testament to its improved risk profile amid broader market stabilization.

Dividend Sustainability: A 6.89% Yield with Room to Grow

Comerica's 6.89% dividend yield for 2025, per the FullRatio dividend page, dwarfs the regional banking sector's average of 2.86%, making it a standout for income investors. This yield is underpinned by a payout ratio of 54%, well below the industry norm of 75% reported by MarketBeat, and a free cash flow (OFCF) payout ratio of 35%. These figures indicate ample capacity to maintain or even increase dividends, even as the company navigates integration costs from the Fifth Third merger.

Analysts project continuity in Comerica's dividend policy. The bank has maintained a quarterly payout of $0.71 per share since 2024, according to StocksGuide, and projections for Q1 2026 suggest no disruption. With the merger expected to close by early 2026, the combined entity's scale-$288 billion in assets-could enhance profitability, further supporting dividend growth. Morgan Stanley and Citigroup have raised price targets to $76 and $61, respectively, reflecting confidence in post-merger earnings accretion.

Strategic Merger: Catalyst for Long-Term Growth

The Fifth Third-Comerica merger is more than a financial transaction; it's a strategic realignment. By acquiring Comerica, Fifth Third gains access to high-growth markets and the Direct Express government debit-card program, while Comerica shareholders benefit from a 20% premium to its 10-day volume-weighted average price. The deal's all-stock structure-issuing 1.8663 Fifth Third shares per Comerica share-aligns incentives for long-term value creation.

Regulatory tailwinds also favor the deal. The Trump administration's streamlined merger approvals have created a more permissive environment, enabling regional banks to pursue scale without the stringent hurdles of the Biden-era framework. This shift has sparked a wave of consolidation, with Comerica's merger potentially serving as a blueprint for future deals.

Risk Considerations and the Path Forward

While the merger offers clear synergies, integration risks remain. Achieving cost savings and cultural alignment will be critical to realizing the $10.9 billion deal's full potential. However, Comerica's strong balance sheet and Fifth Third's operational expertise mitigate these concerns. For investors, the key takeaway is that Comerica's current valuation-discounted relative to its fundamentals and merger premium-presents an opportunity to capture both income and capital appreciation.

Conclusion: A High-Yield Gem in a Merger-Driven Era

Comerica's combination of a compelling yield, robust financials, and a strategic merger positions it as a rare high-conviction opportunity in today's market. For investors seeking undervalued dividend stocks with durable income potential, CMA offers a rare trifecta: a yield above 6%, a sustainable payout ratio, and a catalyst-driven growth story. As the banking sector continues to consolidate, Comerica's merger may prove to be the first of many transformative deals-and its shareholders are poised to benefit.