All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

The Bank of New York Mellon Corporation in Focus

The Bank of New York Mellon Corporation (BK) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 6.78% since the start of the year. The company is paying out a dividend of $0.47 per share at the moment, with a dividend yield of 2.29% compared to the Banks - Major Regional industry's yield of 3.42% and the S&P 500's yield of 1.53%.

In terms of dividend growth, the company's current annualized dividend of $1.88 is up 5.6% from last year. In the past five-year period, 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 9.74%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, The Bank of New York Mellon's payout ratio is 34%, which means it paid out 34% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, BK expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $6.61 per share, with earnings expected to increase 9.62% from the year ago period.

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. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, BK is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).

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