6 Reasons To Invest In Bank Of New York Mellon (BK) Stock

With the economic and industry factors turning in favor of finance stocks, we have selected The Bank of New York Mellon Corporation (NYSE:BK) for your consideration.

The Zacks Rank #2 (Buy) bank displays earnings growth potential on the back of prudent cost-saving measures and capital strength. Also, its improving credit quality remains a tailwind.

Shares of BNY Mellon have gained 13.9% year to date, underperforming the industry’s rally of 18.6%.

Nevertheless, the stock has seen the Zacks Consensus Estimate for current-year earnings being revised slightly upward over the last 90 days.

What Makes the Stock Attractive

Earnings Growth: The company has witnessed EPS growth of 9.9% over the past three-five years compared with3.2% for the industry. Moreover, this earnings momentum is likely to continue in the near term, reflected by the company’s projected EPS growth (F1/F0) of 11.7%.

Also, the company’s long-term (three-five years) estimated EPS growth rate of 7.8% promises rewards for investors inthe long run.

Strong Leverage: BNY Mellon’s debt/equity ratio is 0.85 compared withthe industry average of 0.89, indicating a relatively lower debt burden. It also reflects the company’s financial stability even in adverse economic conditions.

Effective Cost-Saving Initiatives: BNY Mellon’s cost-saving efforts have continuously supported profitability. Expenses have declined at a CAGR of 7% over the last three years (ended 2016).

Impressive Capital Deployment: BNY Mellon’s capital deployment endeavors have remained on track. It got an approval for its 2017 capital plan, which includes repurchase of shares worth up to $3.1 billion and a 26% increase in quarterly dividend. Also, these activities look sustainable as the company’s debt/equity ratio and dividend payout ratio compare favorably with the industry.

Superior Return on Equity (ROE): The company’s ROE of 10.51% compares favorably with the industry’s ROE of 10.29%, reflecting the company’s efficiency in utilizing shareholder’s funds.

Improving Credit Quality: BNY Mellon’s credit quality has improved significantly over the years. The ratio of total allowance for credit losses to total loans came in at 0.44% compared with 0.83% in 2012. Also, the company reported benefit for credit losses in four of the prior five years.

Other Stocks to Consider

Some other top-ranked banking stocks are Hancock Holding Company (NASDAQ:HBHC) , Capstar Financial Holdings (NASDAQ:CSTR) and First Bancorp (NASDAQ:FBNC) , each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hancock Holding has seen the Zacks Consensus Estimate for current-year earnings being revised slightly upward in the last 60 days. The company’s share price has risen almost 10%, over the past six months.

CapstarFinancial’s current-year earnings estimates have been revised 24% upward over the last 60 days. Also, its shares have climbed 18.9% in the past six months.

The Zacks Consensus Estimate for First Bancorp’s current-year earnings has moved 9.7% northover the last 60 days. In the past six months, its share price has grown19.2%.

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