BNY Mellon to Bump Dividend by 10%, Authorizes $6B Share Buyback

The Bank of New York Mellon Corp. (BK) plans to increase its quarterly dividend by 10% to $0.34 per share, starting from Q3 2021.

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Furthermore, the company will repurchase common shares worth up to $6 billion starting in Q3 and continuing through Q4 2022. This new stock buyback program replaces all of the company’s previous buyback programs. (See BNY Mellon stock chart on TipRanks)

The move comes as restrictions on dividends and stock buybacks by the Federal Reserve on large banks end on June 30. Additionally, BNY Mellon was informed by the Federal Reserve that its required Stress Capital Buffer (SCB) will remain at 2.5%, which is the minimum level required by the regulator.

Todd Gibbons, CEO of BNY Mellon said, “We are pleased with the results of this year’s stress test, which once again demonstrated the resilience of our business model and the strength of our balance sheet even under severe stress.”

Gibbons added, “We appreciate the flexibility of the SCB framework as it allows for more nimble capital management and a potential increase of share repurchases in the coming months contingent on board approval and market conditions.”

On June 17, KBW analyst Michael Brown upgraded the stock’s rating to Buy from Hold alongside a price target of $59 (16% upside potential). Brown believes over a longer period, current rate headwinds will turn into meaningful tailwinds for trust banks.

Based on 6 Buys and 4 Holds, consensus on the Street is a Moderate Buy. The average BNY Mellon price target of $54 implies 6.2% upside potential. Shares are up 37.6% over the past year.