Back to top

Image: Bigstock

Why The Bank of New York Mellon Corporation (BK) is a Top Dividend Stock for Your Portfolio

Read MoreHide Full Article

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.

The Bank of New York Mellon Corporation in Focus

Headquartered in New York, The Bank of New York Mellon Corporation (BK - Free Report) is a Finance stock that has seen a price change of 21.27% so far this year. The company is currently shelling out a dividend of $0.47 per share, with a dividend yield of 2.98%. This compares to the Banks - Major Regional industry's yield of 3.25% and the S&P 500's yield of 1.64%.

In terms of dividend growth, the company's current annualized dividend of $1.88 is up 19% from last year. In the past five-year period, 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 7.84%. 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 31%. This means it paid out 31% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BK for this fiscal year. The Zacks Consensus Estimate for 2024 is $5.60 per share, representing a year-over-year earnings growth rate of 10.89%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that BK is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


The Bank of New York Mellon Corporation (BK) - free report >>

Published in