Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 Financial Corp. In Focus

Based in Terre Haute, First Financial Corp. (THFF Quick QuoteTHFF - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 12.58%. Currently paying a dividend of $0.51 per share, the company has a dividend yield of 3.92%. In comparison, the Banks - Midwest industry's yield is 2.77%, while the S&P 500's yield is 1.49%.

In terms of dividend growth, the company's current annualized dividend of $2.04 is up 51.1% from last year. In the past five-year period, First Financial Corp. has increased its dividend 3 times on a year-over-year basis for an average annual increase of 13.25%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. First Financial Corp.'s current payout ratio is 49%, meaning it paid out 49% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, THFF expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $5.41 per share, representing a year-over-year earnings growth rate of 35.25%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that THFF is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).