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

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

First Community in Focus

First Community (FCCO Quick QuoteFCCO - Free Report) is headquartered in Lexington, and is in the Finance sector. The stock has seen a price change of 2.21% since the start of the year. Currently paying a dividend of $0.15 per share, the company has a dividend yield of 2.45%. In comparison, the Banks - Southeast industry's yield is 2.26%, while the S&P 500's yield is 1.54%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.60 is up 3.4% from last year. First Community has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 5.34%. 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, First Community's payout ratio is 33%, which means it paid out 33% of its trailing 12-month EPS as dividend.

FCCO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $2.28 per share, with earnings expected to increase 25.97% from the year ago period.

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. 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. 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 FCCO is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).