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

Popular in Focus

Based in Hato Rey, Popular (BPOP) is in the Finance sector, and so far this year, shares have seen a price change of 24.54%. The company that runs Banco Popular and other banks in Puerto Rico and the U.S. Is paying out a dividend of $0.62 per share at the moment, with a dividend yield of 2.43% compared to the Banks - Southeast industry's yield of 2.45% and the S&P 500's yield of 1.58%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.48 is up 9.3% from last year. In the past five-year period, Popular has increased its dividend 4 times on a year-over-year basis for an average annual increase of 15.27%. 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, Popular's payout ratio is 32%, which means it paid out 32% of its trailing 12-month EPS as dividend.

BPOP is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $8.41 per share, which represents a year-over-year growth rate of 2.94%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 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 BPOP is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).