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 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.

First Savings Financial in Focus

Headquartered in Jeffersonville, First Savings Financial (FSFG) is a Finance stock that has seen a price change of 60.71% so far this year. The bank holding company is currently shelling out a dividend of $0.15 per share, with a dividend yield of 2.22%. This compares to the Financial - Savings and Loan industry's yield of 3% and the S&P 500's yield of 1.51%.

In terms of dividend growth, the company's current annualized dividend of $0.60 is up 1.7% from last year. Over the last 5 years, First Savings Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 27.91%. 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. First Savings Financial's current payout ratio is 28%, meaning it paid out 28% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for FSFG for this fiscal year. The Zacks Consensus Estimate for 2024 is $2.20 per share, which represents a year-over-year growth rate of 29.41%.

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. 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, FSFG 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).