Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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 15.86%. Currently paying a dividend of $0.62 per share, the company has a dividend yield of 2.61%. In comparison, the Banks - Southeast industry's yield is 2.51%, while the S&P 500's yield is 1.51%.

In terms of dividend growth, the company's 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%. 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. Popular's current payout ratio is 30%, meaning it paid out 30% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BPOP for this fiscal year. The Zacks Consensus Estimate for 2024 is $8.85 per share, representing a year-over-year earnings growth rate of 8.32%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, BPOP 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).