Last update on 2024-06-28

Bank of New York Mellon (BK) - Dividend Analysis (Final Score: 4/8)

In-depth analysis of Bank of New York Mellon (BK) dividend policy using 8 criteria. Final score: 4/8. Discover BK's dividend performance and stability.

Short Analysis - Dividend Score: 4

We're running Bank of New York Mellon (BK) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

We analyzed Bank of New York Mellon's (BK) dividend policy using 8 criteria and gave it a score of 4 out of 8. Here are the key points: 1. **Dividend Yield**: BK's current yield of 3.04% is lower than the industry average of 4.33%. It shows steady growth but doesn't match up during strong market phases. 2. **Dividend Growth Rate**: BK's average dividend growth rate over 20 years is 4.86%, just under the 5% benchmark. This shows a consistent but conservative growth approach. 3. **Payout Ratio**: This area wasn't clearly evaluated in your information, but it's crucial for understanding how sustainable their dividends are. 4. **Dividends Covered by Earnings**: Details were missing, but this point checks if the company can pay dividends just from its profit. 5. **Dividends Covered by Cash Flow**: BK is becoming more consistent here, moving from negative values to stable figures in recent years. 6. **Stable Dividends**: Except for a big drop during the 2008 crisis, BK has maintained steady dividends over the years. 7. **Dividends for Over 25 Years**: BK has been paying dividends for more than 25 years, showing long-term reliability. 8. **Stock Repurchases**: BK has a strong record of repurchasing stocks, especially from 2011 onwards, showing confidence in financial stability and future growth.

Insights for Value Investors Seeking Stable Income

BK's dividend performance is decent but not outstanding. It's strong in stability and long-term payments, which is good for conservative investors seeking steady returns. However, its yield and growth rate are below some key benchmarks, meaning it might not offer the best returns compared to other options. If you prefer a safer, reliable dividend stock and are not looking for rapid growth, BK could be a good addition to your portfolio. Otherwise, you might want to explore options with better yields and growth rates.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the ratio of a company's annual dividend compared to its share price. It is an important metric as it provides an idea of the income generated from an investment in the company's stock in terms of dividends alone. A higher yield can indicate a good return on investment, committing to the company's performance and profitability.

BK's current dividend yield of 3.0355% lags behind the industry average of 4.33%. A detailed historical context reveals several trends. From a low yield of 1.66% in 2013, BK's yield saw an overall growth trajectory, peaking dramatically during market uncertainties—the most notable being the 2008 financial crisis at 3.3886%. However, its yield consistently underperforms the industry during bullish market phases, like in 2013 (1.66% vs industry 3%). This reflects risk-averse management favoring resilient, sustainable payout strategies over aggressive dividends. Although currently lower than the industry, BK has steadily increased its dividends per share over 20 years from $0.8056 to $1.58, indicating strong underlying growth potential.

Average annual Growth Rate higher than 5% in the last 20 years?

Dividend growth rate indicates the percentage increase in dividends paid per share by a company over time. This metric is crucial for dividend investors as it shows the company's ability to increase cash payouts, reflecting financial stability and profitability.

When analyzing the dividend growth rate for Bank of New York Mellon (BK) over the past 20 years, the average dividend growth ratio stands at 4.8601%, slightly below the 5% benchmark. This trend indicates a conservative yet consistent approach to increasing dividends. The fluctuation in growth rates over the years further emphasizes the company's measured expansions. For instance, notable dips such as in 2009 (-46.875%) and 2010 (-29.4118%) might raise concerns, possibly due to the financial crisis. However, subsequent recovery and growth trends, like in 2018 and 2019 with ratios of 20.9302% and 13.4615% respectively, are positive signs. Overall, this trend can be considered moderately healthy but leaves room for improvement to achieve or surpass the 5% desired growth rate.

Average annual Payout Ratio lower than 65% in the last 20 years?

Explain the criterion for Bank of New York Mellon (BK) and why it is important to consider

The criterion assesses whether Bank of New York Mellon's average payout ratio has been below 65% over the last 20 years, which would indicate a sustainable dividend policy. Such a ratio shows the proportion of earnings paid out as dividends, leaving enough retained earnings for growth and financial stability.

Dividends Well Covered by Earnings?

Explain the criterion for Bank of New York Mellon (BK) and why it is important to consider

Dividends are well covered by the earnings per share means the company is generating enough profit to cover its dividend payments. This is crucial because if a company consistently pays more in dividends than it earns, it may face liquidity problems or cut dividends in the future.

Dividends Well Covered by Cash Flow?

Explain why it is important for a company's dividends to be well covered by its free cash flow.

A company's dividends being well covered by its free cash flow is crucial because it indicates that the company generates enough profit to pay its shareholders without dipping into its reserves or taking on debt. For Bank of New York Mellon, the percentage of dividend coverage by free cash flow has been highly variable over the years, ranging from a low of -115.7% in 2019 to a high of 81.51% in 2021. Recent figures show a more stable trend with the coverage around 31.69% in 2023. Starting from negative values, this upward trend suggests that BK is becoming more consistent in covering dividends with its cash flow, which is a positive sign for dividend investors.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends suggest a company's reliable profit generation and cash flows, essential for income-seeking investors to ensure consistent returns.

Examining Bank of New York Mellon's (BK) dividend per share (DPS) over the past 20 years, we see overall stability. The most notable drop occurred in 2009 when the DPS fell from $0.96 in 2008 to $0.51 in 2009, a decrease of 46.9%. This volatility coincides with the widespread financial disruptions of the 2008 financial crisis. Since then, BK's dividends have recovered steadily, reaching $1.58 in 2023. This recovery demonstrates BK's resilience and ability to increase shareholder returns post-crisis. Hence, despite the significant drop in 2009, the overall trend is positive.

Dividends Paid for Over 25 Years?

Confirming that a company has a long history of continuously paying dividends is crucial. It signals financial stability, consistent profitability, and a shareholder-friendly management team. For dividend investors, especially those relying on dividends for income, a long track record can provide confidence in the firm's ability to pay future dividends.

Bank of New York Mellon (BK) has a strong history of paying dividends for over 25 years, with the data showing uninterrupted dividend payments from 1998 to 2023. Notably, despite the dip during the 2008-2009 financial crisis to $0.51 and $0.36 per share respectively, the bank quickly resumed its upward dividend trend, reaching $1.58 per share by 2023. This is a good trend for dividend investors, reflecting resilience and a consistent commitment to returning value to shareholders despite economic challenges. The overall growth trend in dividends per share highlights the bank's strengthened capability to generate sufficient earnings.

Reliable Stock Repurchases Over the Past 20 Years?

Assessing historical stock repurchases provides insight into a firm's commitment to returning value to shareholders. It signifies the company's confidence in its financial stability.

Over the past 20 years, Bank of New York Mellon (BK) exhibited fluctuating share repurchase activity. Notably, substantial repurchases occurred in the years: 2005, 2006, 2012, 2013, 2014, 2015, 2016, 2017, 2019, 2020, 2021, 2022, and 2023. For instance, from 2011 to 2023, the share count reduced from 1,223 million to 784 million. Such consistent buybacks reflect strong capital returns to shareholders, enhancing per-share metrics, and showcasing confidence in long-term growth. The per annum average repurchase rate of 0.4509 indicates a strategic endeavor to optimize capital structure and instill shareholder value, which is a positive trend for investors.