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.

Manulife Financial in Focus

Headquartered in Toronto, Manulife Financial (MFC) is a Finance stock that has seen a price change of 35.84% so far this year. The financial services company is currently shelling out a dividend of $0.29 per share, with a dividend yield of 3.86%. This compares to the Insurance - Life Insurance industry's yield of 1.26% and the S&P 500's yield of 1.54%.

Looking at dividend growth, the company's current annualized dividend of $1.16 is up 7.1% from last year. Manulife Financial has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 9.07%. 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. Manulife's current payout ratio is 43%, meaning it paid out 43% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for MFC for this fiscal year. The Zacks Consensus Estimate for 2024 is $2.74 per share, which represents a year-over-year growth rate of 6.61%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, MFC presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).