Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

First Community in Focus

Headquartered in Lexington, First Community (FCCO Quick QuoteFCCO - Free Report) is a Finance stock that has seen a price change of 2.38% so far this year. The holding company for First Community Bank is currently shelling out a dividend of $0.15 per share, with a dividend yield of 2.44%. This compares to the Banks - Southeast industry's yield of 2.28% and the S&P 500's yield of 1.5%.

In terms of dividend growth, the company's current annualized dividend of $0.60 is up 3.4% from last year. Over the last 5 years, First Community has increased its dividend 4 times on a year-over-year basis for an average annual increase of 5.34%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, First Community's payout ratio is 36%, which means it paid out 36% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for FCCO for this fiscal year. The Zacks Consensus Estimate for 2025 is $2.08 per share, with earnings expected to increase 14.92% from the year ago period.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, FCCO is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).