BNY Mellon Raises Dividend by 13% - Analyst Blog

The Bank of New York Mellon Corporation BK announced a 13% raise in its quarterly cash dividend. This follows the Federal Reserve's approval of 2014 Comprehensive Capital Analysis and Review (CCAR) or capital plan in March.

With this, the quarterly dividend of BNY Mellon has increased to 17 cents per share. The dividend will be paid on May 7 to stockholders of record as of Apr 25.

Notably, this is the third time since the financial crisis that BNY Mellon has raised its cash dividend. Earlier, in 2013, the dividend was hiked by 15% to 15 cents per share. Prior to that, in 2011, BNY Mellon had announced a 44% increase in its dividend to 13 cents per share.

Along with the latest dividend hike, BNY Mellon declared dividends on its preferred stock for the quarter ending Jun 2014. The company declared a dividend of $1,022.22 per share on its Series A Preferred Stock, $1,300 per share on the Series C Preferred Stock and $2,250 per share on the Series D Preferred Stock. All these dividends will be paid on Jun 20 to shareholders of record as of Jun 5.

Further, under its 2014 capital plan, BNY Mellon is authorized to repurchase shares worth $1.74 million. The repurchase activity will start from the second quarter of 2014 and continue through the first quarter of 2015.  

BNY Mellon had cleared the 2014 stress test and subsequently got approval to enhance its capital deployment activities. The company was one of the top performers in the recently concluded stress test. Under a severely adverse stress test scenario, the company's Tier 1 common capital ratio was 13.1%, way ahead of the minimum requirement of 5%.

Additionally, BNY Mellon has an impressive business model which enables it to strengthen its balance sheet and efficiently deploy capital. The company's prudent expense management initiatives, diversified revenue mix and strong capital ratios will likely aid further growth. However, tepid economic recovery, a low interest-rate environment and regulatory pressure could mar the company's growth.

Similar to BNY Mellon, last week, The PNC Financial Services Group, Inc. PNC raised its quarterly common stock dividend by 9% to 48 cents per share. This also followed the Fed's approval of its 2014 capital plan. We believe that several banks including JPMorgan Chase & Co. JPM and Bank of America Corp. BAC will soon declare a raise in the payout as their 2014 capital plans have also been approved by the Fed.

Currently, BNY Mellon carries a Zacks Rank #3 (Hold).