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Can Investors Rely on BNY Mellon’s Dividend?

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Saying that Bank of New York Mellon (NYSE: BK) has a rich history is like saying the Broadway show Hamilton did OK at the box office. It’s a massive understatement.

The 240-year-old bank was actually founded by Alexander Hamilton – you know, the secretary of the Treasury who became the unlikely subject of a smash hit musical. (Who knows? Perhaps years from now, we’ll all be tapping our toes to the catchy tunes from Yellen.)

BNY Mellon is enormous, overseeing nearly $50 trillion in clients’ assets, which is equal to just under half of the global GDP.

So the company is big, it’s well established and it pays a regular dividend, which currently yields around 3%. But can investors expect to keep receiving their dividends?

The metric we use to analyze banks’ dividends is net interest income (NII). This is the money that banks make from lending. They do collect fee income as well, but net interest income is the best way to decipher whether management is on the ball when it comes to lending practices.

After a slight stumble during the pandemic, BNY Mellon’s NII has been steadily growing and is expected to surge 27% in 2024, following 24% growth last year and 34% growth the year before.

Chart: NII Has Been Surging Since the Pandemic

Meanwhile, the company paid out $1.26 billion in dividends in 2023 for a payout ratio of just 29%. This year, the total amount paid in dividends is expected to rise to over $1.3 billion, but with NII projected to surge, the payout ratio is forecast to drop to just 24%.

BNY Mellon’s dividend has been higher every year since 2013 – although the company hasn’t technically raised the dividend every year in that span.

Twice in the past decade, the company boosted the dividend in the middle of the year and didn’t raise it again until two years later. However, the total dividend per share continued to rise each year.

Here’s an example from 2019 to 2021 to show you what I mean.

Chart:

Regardless of whether you consider the dividend to have been raised every year, the company hasn’t cut it since the global financial crisis in 2009, when the federal government forced it to do so. Prior to that, there were no cuts going back to at least 1998.

Considering that the payout ratio is extremely low, NII is booming and the company has a stellar track record of paying (and boosting) its dividend, I’m as confident in this dividend as I am that Yellen: The Musical would be a flop.

Dividend Safety Rating: A

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