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 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 4.57% since the start of the year. The holding company for First Financial Bank is paying out a dividend of $0.51 per share at the moment, with a dividend yield of 4.22% compared to the Banks - Midwest industry's yield of 3.18% and the S&P 500's yield of 1.62%.

Looking at 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%. 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.

Earnings growth looks solid for THFF for this fiscal year. The Zacks Consensus Estimate for 2025 is $5.56 per share, representing a year-over-year earnings growth rate of 39%.

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. 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. With that in mind, THFF presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).