We recently compiled a list of the 10 Top Performing Dividend Stocks in 2024. In this article, we are going to take a look at where The Bank of New York Mellon Corporation (NYSE:BK) stands against the other top performing dividend stocks in 2024.
Over time, dividend stocks have shown consistent resilience in difficult market conditions. Despite the recent focus on AI, the long-term appeal of these stocks has grown. Income investors have noticed this shift, reflected in the increasing role of dividends in personal income. A report by S&P Dow Jones Indices reveals that the share of dividend income has risen from 2.68% in the fourth quarter of 1980 to 7.88% in the second quarter of 2024, emphasizing the importance of dividends as a key income source. The report also noted that since 1936, dividends have accounted for more than a third of total equity returns in the broader market, with the rest coming from capital gains.
The dividend growth strategy seems to be working for long-term investors as these stocks have generated strong returns over the years. Considering inflation, dividends have outpaced it, suggesting that investors should focus on these stocks. A report by Wisdom Tree highlighted that from 1957 to 2023, dividends grew at an average annual rate of 5.7%, which is over 2% higher than the inflation rate. The report also pointed out that dividends have only decreased in six years during the past 64 years, and only once by more than 5%. In comparison, stock prices fell in 18 of those years, with the worst decline exceeding 40% and an average drop of over 11%. Stock prices were more than twice as volatile as dividend cash flows, as short-term price movements are more influenced by market sentiment, while long-term value is driven by the stability of cash flows.
READ ALSO: 10 Dividend Stocks For Steady Income
This year, dividend stocks have underperformed compared to the broader market. The Dividend Aristocrat Index has gained only 6% year-to-date, while the market has surged by over 27%. Although this might seem discouraging for dividend investors, seasoned investors recognize that this presents a great opportunity to buy dividend stocks. Chris O’Keefe, a portfolio manager at Logan Capital Management, pointed out that the widening performance gap between the market and dividend stocks in 2024 creates an ideal time for investors to consider these equities. Along with O’Keefe, many analysts are encouraging investors to focus on dividend stocks due to their favorable outlook. The Dividend Aristocrats index has struggled to keep pace with the market since 2020. Dividend stocks saw a brief resurgence in 2022 as recession concerns led investors to seek out stable sectors like utilities and consumer goods, but the recovery was short-lived. By 2023, rising interest rates made bond and money-market returns more attractive than dividend yields, causing companies to adopt a more cautious stance and conserve cash amid economic uncertainty. This year, many of the top-performing stocks from the COVID era have once again driven the market to new highs.
Despite underperforming for the past two consecutive years, analysts remain optimistic about dividend stocks. They believe that dividend-paying equities could see a resurgence in 2025, as investors are increasingly seeking cash returns. The broader market’s dividend yield recently dropped to a 20-year low, falling below 1.19%, significantly lower than the long-term historical average of 4.3%. With interest rates rising on risk-free investments like Treasuries, companies are recognizing the growing competition for yield. As a result, many are responding by increasing dividends or introducing them for the first time. Notably, several major technology companies began paying dividends in 2024, signaling to the market that they are positioning themselves as value plays within a high-growth sector.
An aerial view of a modern skyscraper, highlighting the company’s corporate services and treasury arm.
Our Methodology
For this article, we first used a stock screener to identify stocks that have reported positive returns in 2024 so far. From this selection, we chose dividend stocks with the highest year-to-date (YTD) as of December 25. The stocks were then arranged in ascending order of their YTD gains. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
The Bank of New York Mellon Corporation (NYSE:BK)
Year-to-Date Return as of December 25: 49.01%
The Bank of New York Mellon Corporation (NYSE:BK) is a New York-based financial services company that was established in 2007 through the merger of the Bank of New York and Mellon Financial Corporation and became the largest custodian bank globally. Unlike conventional banks that focus on commercial and consumer services such as accepting deposits and offering loans, BNY Mellon specializes in providing security services to asset owners, including other financial institutions. The stock has surged by over 49% in 2024 so far.
The bank’s performance was also highlighted by Parnassus Investments in its Q3 2024 investor letter. Here is what the firm has to say:
“The Bank of New York Mellon Corporation (NYSE:BK) posted better-than-expected second-quarter profit and revenue, driven in part by higher fees. Further, the Federal Reserve’s interest rate cut is expected to reduce funding costs and improve BNY’s margins.”
The Bank of New York Mellon Corporation (NYSE:BK) delivered solid results for the third quarter, showcasing growth across its three business segments and steady progress on its strategic goals. For the first time, assets under custody and administration surpassed $50 trillion. The company reported earnings of $1.50 per share, marking a 22% increase compared to the previous year. Adjusted for notable items, earnings per share rose to $1.52, reflecting a 20% year-over-year improvement, while the return on tangible common equity reached 23% during the quarter. Its total revenue for the quarter came in at $4.7 billion, which showed a 7% growth from the same period last year.
On October 11, The Bank of New York Mellon Corporation (NYSE:BK) declared a quarterly dividend of $0.47 per share, which was in line with its previous dividend. In 2024, the company stretched its dividend growth streak to 14 years, which makes BNY one of the best performing stocks that pay dividends. Moreover, in the most recent quarter, it returned $353 million to shareholders through dividends. The stock has a dividend yield of 2.41%, as of December 25.
At the end of Q3 2024, 45 hedge funds tracked by Insider Monkey held stakes in The Bank of New York Mellon Corporation (NYSE:BK), compared with 50 in the previous quarter. These stakes have a collective value of nearly $1.5 billion.
Overall, BK ranks 10th on our list of the best performing dividend stocks in 2024. While we acknowledge the potential for BK to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.