Here's Why You Should Add Commerce Bancshares Stock to Your Portfolio

Commerce Bancshares, Inc. CBSH is well-positioned for growth, given the decent loan demand, relatively higher interest rates and its balance sheet repositioning strategy. Moreover, solid liquidity and non-interest income growth will further support its financials.

Here’s What Makes CBSH Stock Worth Betting On

Rising Revenues: Driven by growth in loan demand and fee income, Commerce Bancshares’ total revenues witnessed a compound annual growth rate (CAGR) of 4.2% over the last five years (2019-2024).

Revenue Trend

Further, relatively higher interest rates will likely support CBSH’s net yield on interest-earning assets and net interest income (NII), although rising funding costs will weigh on both. In May 2024, the company announced a balance sheet repositioning strategy, which will continue to bolster its NII. Under this, the company sold its debt securities and reinvested the proceeds at higher yields.

CBSH’s NII and loans reflected a CAGR of 4.8% and 2.2%, respectively, over the last five years. Further, the company’s net yield on interest-earning assets expanded to 3.47% in 2024 from 3.16% in 2023 and 2.85% in 2022, driven by higher rates.

Decent loan demand, solid fee income and a higher-for-longer interest-rate scenario are likely to support top-line expansion in the upcoming period, though rising funding costs will weigh on it to some extent.

Sales Estimates

Encouraging Capital Distributions: As of Dec. 31, 2024, CBSH’s total cash and cash equivalents (consisting of cash and due from banks and interest-earning deposits with banks) were $3.4 billion. Total debt (comprising other liabilities and other borrowings) was $443.8 million.

Also, the company maintains investment-grade ratings of A- and a stable outlook from Standard & Poor’s. This renders the company favorable access to the debt market. Thus, given its decent earnings strength and a solid liquidity position, Commerce Bancshares will likely be able to address debt obligations in the near term, even if the economic situation worsens.

Moreover, the company has been paying a 5% stock dividend over the past 25 years, with the most recent one announced in October 2024. The company has been consistently paying quarterly cash dividends. It has increased its dividend seven times in the past five years with a dividend payout ratio of 27%. Also, based on CBSH’s closing price of $62.27 on March 27, 2025, its dividend yield is 1.77%.

Dividend Yield

Similarly, its peers Associated Banc-Corp ASB and Bank OZK OZK raised dividends four and 20 times in the same period, respectively. Further, Associated Banc-Corp & Bank OZK had dividend payout ratios of 42% and 27%, respectively.

Also, Commerce Bancshares has a share repurchase plan in place. As of Dec. 31, 2024, roughly 3.6 million shares remained available under the authorization.

Given its decent earnings strength and strong liquidity position, the company is expected to continue efficient capital distributions, thus enhancing shareholder value.

Superior Return on Equity (ROE): CBSH’s trailing 12-month ROE reflects its superiority in terms of utilizing shareholders’ funds. The company’s ROE of 16.3% compares favorably with 10.5% of the industry.

ROE Trend

Earnings Growth: Commerce Bancshares witnessed earnings growth of 9.3% over the past three to five years. This was driven by the company’s organic growth strategy, solid customer relationships and strong risk management.

Earnings Estimates

Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

Final Thoughts on Commerce Bancshares Stock

Relatively high interest rates, solid fee income and decent loan demand are likely to support Commerce Bancshares’ financials. Further, a robust liquidity position is another positive.

Over the past year, CBSH stock has risen 17%, outperforming the industry, the Zacks Finance Sector, and the S&P 500 index. Also, the company’s shares have fared better than its peers, Associated Banc-Corp and Bank OZK.

One-Year Price Performance

However, rising expenses and worsening asset quality remain concerns. Nonetheless, the company’s balance sheet repositioning strategy will continue to aid top-line expansion. Thus, CBSH stock remains a lucrative bet for investors now.

CBSH currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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