Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
The Bank of New York Mellon Corporation in Focus
The Bank of New York Mellon Corporation (BK) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of -2.93% since the start of the year. Currently paying a dividend of $0.34 per share, the company has a dividend yield of 2.41%. In comparison, the Banks - Major Regional industry's yield is 2.47%, while the S&P 500's yield is 1.45%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.36 is up 4.6% 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 11.05%. 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%. This means it paid out 33% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BK expects solid earnings growth. The Zacks Consensus Estimate for 2022 is $4.69 per share, with earnings expected to increase 12.20% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. 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).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Bank of New York Mellon Corporation (BK) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research