Saying that Financial institution of New York Mellon (NYSE: BK) has a wealthy historical past is like saying the Broadway present Hamilton did OK on the field workplace. It’s a large understatement.
The 240-year-old financial institution was really based by Alexander Hamilton – you realize, the secretary of the Treasury who turned the unlikely topic of a smash hit musical. (Who is aware of? Maybe years from now, we’ll all be tapping our toes to the catchy tunes from Yellen.)
BNY Mellon is gigantic, overseeing almost $50 trillion in purchasers’ belongings, which is the same as slightly below half of the worldwide GDP.
So the corporate is massive, it’s nicely established and it pays a daily dividend, which at the moment yields round 3%. However can buyers count on to maintain receiving their dividends?
The metric we use to investigate banks’ dividends is internet curiosity revenue (NII). That is the cash that banks make from lending. They do accumulate price revenue as nicely, however internet curiosity revenue is one of the best ways to decipher whether or not administration is on the ball in the case of lending practices.
After a slight stumble throughout the pandemic, BNY Mellon’s NII has been steadily rising and is anticipated to surge 27% in 2024, following 24% progress final yr and 34% progress the yr earlier than.
In the meantime, the corporate paid out $1.26 billion in dividends in 2023 for a payout ratio of simply 29%. This yr, the full quantity paid in dividends is anticipated to rise to over $1.3 billion, however with NII projected to surge, the payout ratio is forecast to drop to simply 24%.
BNY Mellon’s dividend has been larger yearly since 2013 – though the corporate hasn’t technically raised the dividend yearly in that span.
Twice previously decade, the corporate boosted the dividend in the course of the yr and didn’t elevate it once more till two years later. Nevertheless, the full dividend per share continued to rise annually.
Right here’s an instance from 2019 to 2021 to point out you what I imply.
No matter whether or not you think about the dividend to have been raised yearly, the corporate hasn’t reduce it because the international monetary disaster in 2009, when the federal authorities pressured it to take action. Previous to that, there have been no cuts going again to no less than 1998.
Contemplating that the payout ratio is extraordinarily low, NII is booming and the corporate has a stellar monitor report of paying (and boosting) its dividend, I’m as assured on this dividend as I’m that Yellen: The Musical can be a flop.
Dividend Security Ranking: A
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