Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 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.

Eagle Bancorp Montana, Inc. In Focus

Headquartered in Helena, Eagle Bancorp Montana, Inc. (EBMT Quick QuoteEBMT - Free Report) is a Finance stock that has seen a price change of 9.59% so far this year. The company is paying out a dividend of $0.14 per share at the moment, with a dividend yield of 3.39% compared to the Banks - Midwest industry's yield of 3.2% and the S&P 500's yield of 1.57%.

Looking at dividend growth, the company's current annualized dividend of $0.57 is up 0.9% from last year. In the past five-year period, Eagle Bancorp Montana, Inc. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.60%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Eagle Bancorp Montana's current payout ratio is 46%, meaning it paid out 46% of its trailing 12-month EPS as dividend.

EBMT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $1.61 per share, with earnings expected to increase 29.84% from the year ago period.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EBMT is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).