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.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 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 37.98%. Currently paying a dividend of $0.47 per share, the company has a dividend yield of 2.62%. In comparison, the Banks - Major Regional industry's yield is 3.24%, while the S&P 500's yield is 1.55%.

In terms of dividend growth, the company's current annualized dividend of $1.88 is up 19% 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 7.84%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. The Bank of New York Mellon's current payout ratio is 31%. This means it paid out 31% of its trailing 12-month EPS as dividend.

BK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $5.63 per share, representing a year-over-year earnings growth rate of 11.49%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that BK is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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