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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, 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
Based in New York, The Bank of New York Mellon Corporation (BK) is in the Finance sector, and so far this year, shares have seen a price change of 32.92%. The company is currently shelling out a dividend of $0.34 per share, with a dividend yield of 2.41%. This compares to the Banks - Major Regional industry's yield of 2.69% and the S&P 500's yield of 1.35%.
In terms of dividend growth, the company's current annualized dividend of $1.36 is up 9.7% 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 12.62%. Future dividend growth will depend on earnings growth as well as 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 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, with earnings expected to increase 3.49% from the year ago period.
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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