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.

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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

First Financial Corp. In Focus

First Financial Corp. (THFF Quick QuoteTHFF - Free Report) is headquartered in Terre Haute, and is in the Finance sector. The stock has seen a price change of 8.66% since the start of the year. Currently paying a dividend of $0.51 per share, the company has a dividend yield of 4.06%. In comparison, the Banks - Midwest industry's yield is 2.96%, while the S&P 500's yield is 1.56%.

Looking at dividend growth, the company's current annualized dividend of $2.04 is up 51.1% from last year. Over the last 5 years, First Financial Corp. has increased its dividend 3 times on a year-over-year basis for an average annual increase of 13.25%. 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. First Financial Corp.'s current payout ratio is 45%, meaning it paid out 45% of its trailing 12-month EPS as dividend.

THFF is expecting earnings to expand this fiscal year as well. 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. But, not every company offers 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. Income investors must be conscious 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 THFF is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).