Why Canadian Imperial Bank's Dividends Are Safe Amid Rising Rates: A Pre-Earnings Deep Dive

Canadian Imperial Bank of Commerce (CM) is set to report Q3 2025 earnings, and investors are watching closely for clues about its ability to sustain its attractive dividend yield of 4.2% in a rising-rate environment. With the bank’s payout ratio well within safe bounds and its net interest margin (NIM) showing resilience, now could be an opportune time to position for income and growth. Here’s why CM remains a compelling buy ahead of its earnings release.

A Dividend Machine with Room to Grow

CM’s dividend history speaks for itself. The bank has paid uninterrupted dividends since 1868, with consistent increases over time. The latest quarterly dividend of CA$0.97 per share, announced in February 2025, marks a steady climb from CA$0.805 in early 2022. With a payout ratio of 47.5%—well below the 50% threshold many analysts consider risky—CM has ample earnings to cover distributions. Even the projected payout ratio of 54.1% for 2028 suggests management remains cautious, leaving room for further hikes.

This stability contrasts with broader market volatility. While some banks have trimmed payouts during economic downturns, CM’s conservative approach has insulated it from such pressures.

Net Interest Margin: A Fortress Against Rate Headwinds

The Q3 earnings release will likely highlight CM’s NIM, a critical metric for banks in a rising-rate environment. Historically, Canadian banks have navigated rate hikes better than their U.S. peers due to stronger loan demand and robust capital buffers.

While Q2 2025 data shows CM’s NIM held steady amid rate increases, the bank’s loan portfolio mix is a key advantage. A focus on commercial real estate (CRE) and industrial lending—sectors with higher margins and long-term growth potential—positions CM to capitalize on rate-sensitive borrowers. Meanwhile, its diversified retail loan book (mortgages, credit cards) ensures steady income streams.

Even if Q3 NIM edges lower due to competitive pricing or loan mix shifts, CM’s 47.5% payout ratio provides a cushion. The bank’s cost-of-funds management, including sticky deposit growth, further insulates margins from pressure.

Loan Growth: Fueling Dividend Resilience

CM’s loan portfolio has been a consistent driver of earnings. Despite softening global demand, the bank’s Q2 2025 results showed 3% annualized loan growth, fueled by corporate clients in sectors like tech and infrastructure. These high-quality borrowers offer better risk-adjusted returns than volatile consumer loans.

In Q3, look for continued growth in CRE loans tied to industrial and logistics projects—a booming sector driven by e-commerce and supply chain resilience. Management’s emphasis on “selective lending” also mitigates defaults, as seen in Q2’s 2.7% non-performing loan ratio, below the Canadian banking average.

Why the Q3 Earnings Release Matters Now

With the earnings date approaching, investors should focus on three catalysts:
1. NIM Stability: A NIM above 1.6% (its Q2 level) would signal effective pricing power.
2. Loan Growth Momentum: 4%+ annualized growth would affirm demand for CM’s services.
3. Dividend Guidance: Any mention of a 2026 hike or revised payout ratio targets could spark a rally.

CM’s valuation also looks attractive. Trading at 11.5x trailing earnings (vs. the sector’s 12.2x), it offers a margin of safety. With a projected dividend yield of 4.9% by 2028, income-focused investors stand to benefit from both payouts and capital appreciation.

Final Verdict: Buy Before Earnings, Harvest After

Canadian Imperial Bank is a rare blend of dividend reliability and growth potential in today’s uncertain market. Its conservative payout ratio, diversified loan book, and fortress-like balance sheet make it a top pick for income investors. With Q3 earnings likely to reinforce these strengths, now is the time to act.

Action Item: Purchase CM shares ahead of the earnings release. If the report confirms margin resilience and loan growth, expect a multi-month rally fueled by dividend optimism and sector rotation into financials. This is a rare opportunity to lock in a 4.2% yield with growth on the horizon.

Disclosure: The author holds no positions in CM at the time of writing.