BNY Mellon’s Total Shareholder Payout In 2019 Will Be Identical To The Record Payout For 2018

BNY Mellon (NYSE:BK) will return $5 billion to its shareholders over the next twelve months as a part of its latest capital return plan which was announced after the recent conclusion of the Fed’s annual stress test for the year. Trefis has analyzed the trends in BNY Mellon’s dividend payouts and share repurchases  over the last 5 years and has summarized our expectations for the next three. You can modify Trefis forecasts to see the impact any changes would have on the BNY Mellon share repurchase and dividends using our Interactive Dashboard, and also see more Trefis data for financial services companies here.

BNY Mellon’s 2019 Capital Return Plan

• Under the new plan, BNY Mellon will hike its quarterly dividends by 11% – from 28 cents now to 31 cents a share beginning Q3 2019. This works out to total dividends of $1.1 billion assuming average outstanding shares of 900 million.
• The bank will also repurchase $3.9 billion worth of its common shares over the next twelve months – which is 20% more than $3.3 billion announced in 2018
• Taken together, this works out to a shareholder payout of $5 billion over the next twelve month.

The chart below details BNY Mellon’s total shareholder payouts for each year since 2013, and includes our forecast for the next three years.

Historical Payouts

• Before the 2008 recession, BNY Mellon paid average dividends of $728 million to its common stockholders over 2005-2007.
• However, the economic downturn forced the bank to slash dividends to less than $600 million a year over 2009-10 and forced it to wait for two years after that to begin distributing any meaningful amount of cash to investors.
• Although dividends remained low over the next three years, the bank repurchased around $1 billion worth of common stock every year to return cash to the shareholders.
• Quarterly dividends recovered in Q2 2014 from 15-cent to 17-cents per share, and since then, have gradually increased over the years to the current level of 28 cents per share.
• Dividends should increase to 31 cents per share for Q3 2019 – Q2 2020.
• Over the last ten years, Capital One has returned $22.7 billion in cash to common shareholders, an average of $2.3 billion a year – representing about 91% of its average retained earnings of $2.5 billion for this period.
• Notably, the bank has paid $7.2 billion in dividend and $15.5 billion in share buybacks over the last decade.
• The bank has preferred share repurchase to dividends since the downturn as the main method to return cash to the shareholders.

What To Expect In 2019

• We expect total dividends to be around $1.1 billion, as the annual dividend per share will increase to $1.18 from $1.05 in 2018. Also, the bank has repurchased $555 million in shares in Q1 2019 and is expected to have repurchased shares worth an additional $700 million in the second quarter (remaining share buyback out of $3.3 billion approved in the 2018 capital return plan).
• Taken together with $1.95 billion in proposed purchases for the rest of the year (half of the total proposed repurchases of $3.9 billion), total share repurchases is expected to be around $3.2 billion in 2019.
• The total payout for the year is, therefore, likely to be over $4.3 billion nearly identical to the record payout seen over 2018.

We factor in these payouts in our analysis of BNY Mellon in the form of an adjusted dividend payout rate (which is the total payout ratio), shown in the chart below.

Do not agree with our forecast? Create your own forecast for BNY Mellon by changing the base inputs (blue dots) on our interactive dashboard.

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