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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 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.
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 18.4% so far this year. The company is paying out a dividend of $0.31 per share at the moment, with a dividend yield of 2.71% compared to the Banks - Major Regional industry's yield of 2.73% and the S&P 500's yield of 1.34%.
Looking at dividend growth, the company's current annualized dividend of $1.36 is up 9.7% 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 12.62%. 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 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 2021 is $4.15 per share, which represents a year-over-year growth rate of 3.49%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious 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).
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The Bank of New York Mellon Corporation (BK) : Free Stock Analysis Report
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