All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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 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 Bancorp in Focus

First Bancorp (FBP Quick QuoteFBP - Free Report) is headquartered in San Juan, and is in the Finance sector. The stock has seen a price change of 6.62% since the start of the year. Currently paying a dividend of $0.18 per share, the company has a dividend yield of 3.63%. In comparison, the Banks - Southeast industry's yield is 2.38%, while the S&P 500's yield is 1.62%.

In terms of dividend growth, the company's current annualized dividend of $0.72 is up 12.5% from last year. In the past five-year period, First Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 31.93%. 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. Right now, First Bancorp's payout ratio is 39%, which means it paid out 39% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, FBP expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $1.88 per share, which represents a year-over-year growth rate of 3.87%.

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.

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 FBP is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).