Why The Bank of New York Mellon Corporation (BK) is a Top Dividend Stock for Your Portfolio
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.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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) is a Finance stock that has seen a price change of 11.09% so far this year. Currently paying a dividend of $0.37 per share, the company has a dividend yield of 2.93%. In comparison, the Banks - Major Regional industry's yield is 3.1%, while the S&P 500's yield is 1.59%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.48 is up 4.2% 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 7.78%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. The Bank of New York Mellon Corporation's current payout ratio is 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for BK for this fiscal year. The Zacks Consensus Estimate for 2023 is $4.71 per share, representing a year-over-year earnings growth rate of 2.61%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that BK is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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