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BNY Mellon (BK) Intends to Hike Quarterly Dividend by 11.9%
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Following the declaration of 2024 stress test results, The Bank of New York Mellon Corp. (BK - Free Report) announced its plans to increase the quarterly cash dividend by 11.9% to 47 cents per share, beginning as early as the third quarter of 2024, subject to board approval.
Last week, the Federal Reserve disclosed the results of its 2024 bank stress test, which exhibits the robustness and strength of BNY Mellon’s business model and capital position. The Fed further informed that the company’s preliminary Stress Capital Buffer (SCB) requirements will stay at 2.5%, matching the regulatory floor. This SCB will be effective from Oct 1, 2024, to Sep 30, 2025.
In the stress test exercise, the Fed evaluates the balance sheets of major banks against a hypothetical severe economic downturn and the results determine the amount of capital banks require to hold to be considered healthy. The Fed introduced annual stress tests in consequence of the 2008 financial crisis as a tool to ensure banks could withstand a similar event in the future.
This year, 31 lenders were part of the stress test. After the results were announced, similar to BK, many large financial firms, including The Goldman Sachs Group, Inc. (GS - Free Report) , Bank of America Corp. (BAC - Free Report) and JPMorgan Chase & Co. (JPM - Free Report) , revealed their capital plans.
Goldman announced its plans to hike quarterly dividend by 9.1% to $3 per share. Likewise, BAC and JPM also announced their intention to increase quarterly dividends by 8.33% and 8.7% to 26 cents per share and $1.25 per share, respectively.
Robin Vince, president and CEO of BNY Mellon, said, “The results of the Federal Reserve's annual bank stress tests showcase BNY's resilient business model and our strength to support clients through extreme stress scenarios.”
BNY Mellon has increased its dividend payout four times in the last five years, with the latest hike announced last July. Its annualized five-year dividend growth rate is 7.84%. Currently, BK’s payout ratio is 32% of earnings. This indicates that it retains adequate earnings for reinvestment and future growth initiatives while still delivering decent returns to its shareholders.
Based on its closing price of $59.89 as of Jun 28, BK’s current dividend yield is 2.8%.
The company has an existing share repurchase plan as well, announced in January 2023 and April 2024. As of Mar 31, 2024, BK had roughly $1.41 billion worth of authorization left to be repurchased under its January 2023 plan. In April 2024, the company announced a new share repurchase plan worth $6 billion, which will be effective upon the full utilization of the January 2023 program.
Given the solid balance sheet and capital position, as reflected in the stress test results, BNY Mellon is expected to sustain its enhanced capital distribution activities.
Shares of BNY Mellon have risen 14.3% over the past six months compared with the industry’s growth of 14.1%.
Image: Bigstock
BNY Mellon (BK) Intends to Hike Quarterly Dividend by 11.9%
Following the declaration of 2024 stress test results, The Bank of New York Mellon Corp. (BK - Free Report) announced its plans to increase the quarterly cash dividend by 11.9% to 47 cents per share, beginning as early as the third quarter of 2024, subject to board approval.
Last week, the Federal Reserve disclosed the results of its 2024 bank stress test, which exhibits the robustness and strength of BNY Mellon’s business model and capital position. The Fed further informed that the company’s preliminary Stress Capital Buffer (SCB) requirements will stay at 2.5%, matching the regulatory floor. This SCB will be effective from Oct 1, 2024, to Sep 30, 2025.
In the stress test exercise, the Fed evaluates the balance sheets of major banks against a hypothetical severe economic downturn and the results determine the amount of capital banks require to hold to be considered healthy. The Fed introduced annual stress tests in consequence of the 2008 financial crisis as a tool to ensure banks could withstand a similar event in the future.
This year, 31 lenders were part of the stress test. After the results were announced, similar to BK, many large financial firms, including The Goldman Sachs Group, Inc. (GS - Free Report) , Bank of America Corp. (BAC - Free Report) and JPMorgan Chase & Co. (JPM - Free Report) , revealed their capital plans.
Goldman announced its plans to hike quarterly dividend by 9.1% to $3 per share. Likewise, BAC and JPM also announced their intention to increase quarterly dividends by 8.33% and 8.7% to 26 cents per share and $1.25 per share, respectively.
Robin Vince, president and CEO of BNY Mellon, said, “The results of the Federal Reserve's annual bank stress tests showcase BNY's resilient business model and our strength to support clients through extreme stress scenarios.”
BNY Mellon has increased its dividend payout four times in the last five years, with the latest hike announced last July. Its annualized five-year dividend growth rate is 7.84%. Currently, BK’s payout ratio is 32% of earnings. This indicates that it retains adequate earnings for reinvestment and future growth initiatives while still delivering decent returns to its shareholders.
Based on its closing price of $59.89 as of Jun 28, BK’s current dividend yield is 2.8%.
The company has an existing share repurchase plan as well, announced in January 2023 and April 2024. As of Mar 31, 2024, BK had roughly $1.41 billion worth of authorization left to be repurchased under its January 2023 plan. In April 2024, the company announced a new share repurchase plan worth $6 billion, which will be effective upon the full utilization of the January 2023 program.
Given the solid balance sheet and capital position, as reflected in the stress test results, BNY Mellon is expected to sustain its enhanced capital distribution activities.
Shares of BNY Mellon have risen 14.3% over the past six months compared with the industry’s growth of 14.1%.
Image Source: Zacks Investment Research
Currently, BK carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.