Starting with $18,000 to create passive income from dividend stocks is a fantastic idea, especially for Canadian investors looking to build a stable income stream over the long term. This amount is large enough to invest in a diversified portfolio, key to managing risks and maximizing returns. By focusing on well-established dividend-paying stocks, you can enjoy a combination of steady income and potential capital growth. Among the many options available, Canadian Imperial Bank of Commerce (TSX:CM) on the TSX stands out as a particularly strong choice for dividend investors.
CIBC stock
CIBC is one of Canada’s largest and most trusted banks, with a long history of rewarding its shareholders through consistent and growing dividend payments. As of early 2025, the dividend stock offers an attractive forward dividend yield of around 4%. Thus translating to annual dividends of $3.60 per share. With $18,000 to invest, this could provide you with approximately $705.60 in annual income, assuming you invest in CIBC alone.
Recent earnings further bolster CIBC’s case as a strong dividend stock. In its most recent report for the fourth quarter of 2024, the bank posted earnings per share (EPS) of $1.40, exceeding analysts’ expectations of $1.26. This 11% earnings surprise highlights the bank’s strong operational performance. Moreover, CIBC’s quarterly revenue showed year-over-year growth of 19.6%, reaching $5.9 billion, driven by strong performance in retail and business banking as well as wealth management.
When evaluating CIBC’s dividend sustainability, the numbers are reassuring. The bank’s dividend payout ratio sits at a manageable 51.7%, indicating that just over half of its earnings are distributed to shareholders as dividends, thus leaving plenty of room for reinvestment in growth opportunities and maintaining financial stability.
Performance
Looking back, CIBC has consistently demonstrated strong performance. Over the past year, its stock has delivered a total return of over 48%, significantly outpacing the broader TSX. This impressive performance reflects not only the bank’s operational efficiency but also investor confidence in its future prospects. With a trailing price-to-earnings ratio of 12.6, CIBC remains reasonably valued compared to its peers, thus making it an attractive option for investors seeking both value and income.
In terms of future outlook, CIBC is well-positioned to benefit from continued economic growth and rising interest rates, which typically boost the profitability of banks. The dividend stock is also focused on expanding its wealth management and capital markets divisions – higher-margin segments that contribute to its long-term growth. Another factor that sets CIBC apart is its commitment to consistent dividend growth. The bank has increased its dividend annually for over a decade, demonstrating a strong commitment to returning value to shareholders.
Bottom line
Starting with $18,000 gives you a meaningful amount to begin investing in dividend stocks like CIBC. By holding the stock in a Tax-Free Savings Account (TFSA), you can shield your dividend income and capital gains from taxes, maximizing your returns over time. So how much could it earn through returns and dividends should shares rise another 48%?
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| CM – now | $91.79 | 196 | $3.60 | $705.60 | quarterly | $18,000 |
| CM – 48% | $135.85 | 196 | $3.60 | $705.60 | quarterly | $26,626.60 |
Now you’ve earned $8,626.60 in returns and $705.60 in dividends totalling $9,332.20 in passive income! Of course, diversification is key to managing risk. While CIBC is an excellent option, it’s a good idea to spread your investment across other dividend-paying stocks in different sectors. This will ensure that your portfolio is not overly exposed to the financial sector and that you’re well-positioned to weather market volatility.
All in all, starting with $18,000 to invest in dividend stocks is a smart move for generating passive income. CIBC stands out as a strong option due to its consistent dividend history, solid recent earnings, reasonable valuation, and promising future outlook. By investing in reliable dividend stocks like CIBC and diversifying your portfolio, you can build a stable foundation for long-term financial success. And enjoy the benefits of passive income along the way.