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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.

Bar Harbor Bankshares in Focus

Bar Harbor Bankshares (BHB Quick QuoteBHB - Free Report) is headquartered in Bar Harbor, and is in the Finance sector. The stock has seen a price change of 1.7% since the start of the year. The bank is currently shelling out a dividend of $0.3 per share, with a dividend yield of 3.86%. This compares to the Banks - Northeast industry's yield of 2.62% and the S&P 500's yield of 1.49%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.20 is up 1.7% from last year. Bar Harbor Bankshares has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 7.72%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Bar Harbor's payout ratio is 42%, which means it paid out 42% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, BHB expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $2.84 per share, which represents a year-over-year growth rate of 0.35%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that BHB is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).