Bank of New York Mellon (NYSE:BK) Has Announced That It Will Be Increasing Its Dividend To $0.47

The Bank of New York Mellon Corporation's (NYSE:BK) periodic dividend will be increasing on the 2nd of August to $0.47, with investors receiving 12% more than last year's $0.42. This takes the annual payment to 2.6% of the current stock price, which is about average for the industry.

See our latest analysis for Bank of New York Mellon

Bank of New York Mellon's Earnings Will Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time.

Having distributed dividends for at least 10 years, Bank of New York Mellon has a long history of paying out a part of its earnings to shareholders. Based on Bank of New York Mellon's last earnings report, the payout ratio is at a decent 40%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 61.3%. The future payout ratio could be 27% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Bank of New York Mellon Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was $0.60, compared to the most recent full-year payment of $1.68. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Bank of New York Mellon May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 2.3% per annum over the last five years, which admittedly is a bit slow. Growth of 2.3% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Bank of New York Mellon Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Bank of New York Mellon that investors need to be conscious of moving forward. Is Bank of New York Mellon not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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