All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Based in New York, The Bank of New York Mellon Corporation (BK) is in the Finance sector, and so far this year, shares have seen a price change of 37.3%. Currently paying a dividend of $0.53 per share, the company has a dividend yield of 2.01%. In comparison, the Banks - Major Regional industry's yield is 3.2%, while the S&P 500's yield is 1.5%.
Looking at dividend growth, the company's current annualized dividend of $2.12 is up 19.1% from last year. Over the last 5 years, The Bank of New York Mellon Corporation has increased its dividend 4 times on a year-over-year basis for an average annual increase of 10.57%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. The Bank of New York Mellon's current payout ratio is 28%, meaning it paid out 28% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BK for this fiscal year. The Zacks Consensus Estimate for 2025 is $7.14 per share, representing a year-over-year earnings growth rate of 18.41%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, BK is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of #3 (Hold).
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The Bank of New York Mellon Corporation (BK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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