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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 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 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
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 -0.29%. The company is paying out a dividend of $0.47 per share at the moment, with a dividend yield of 2.45% compared to the Banks - Major Regional industry's yield of 4.19% and the S&P 500's yield of 1.7%.
Looking at dividend growth, the company's current annualized dividend of $1.88 is up 5.6% 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 10.29%. 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's current payout ratio is 31%, meaning 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 2025 is $6.81 per share, which represents a year-over-year growth rate of 12.94%.
Bottom Line
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.
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).