All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Bank OZK in Focus

Based in Little Rock, Bank OZK (OZK) is in the Finance sector, and so far this year, shares have seen a price change of -16.52%. Currently paying a dividend of $0.4 per share, the company has a dividend yield of 3.85%. In comparison, the Banks - Northeast industry's yield is 2.8%, while the S&P 500's yield is 1.57%.

In terms of dividend growth, the company's current annualized dividend of $1.60 is up 12.7% from last year. In the past five-year period, Bank OZK has increased its dividend 5 times on a year-over-year basis for an average annual increase of 10.17%. 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. Bank OZK's current payout ratio is 26%, meaning it paid out 26% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, OZK expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $6.01 per share, which represents a year-over-year growth rate of 2.39%.

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. It's important to keep in mind that not all companies provide 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, OZK 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).