Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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

Headquartered in Hato Rey, Popular (BPOP) is a Finance stock that has seen a price change of 8.61% so far this year. The company that runs Banco Popular and other banks in Puerto Rico and the U.S. Is currently shelling out a dividend of $0.7 per share, with a dividend yield of 2.74%. This compares to the Banks - Southeast industry's yield of 2.28% and the S&P 500's yield of 1.57%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.80 is up 9.4% from last year. In the past five-year period, Popular has increased its dividend 3 times on a year-over-year basis for an average annual increase of 12.86%. 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. Right now, Popular's payout ratio is 29%, which means it paid out 29% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for BPOP for this fiscal year. The Zacks Consensus Estimate for 2025 is $10.54 per share, with earnings expected to increase 17.11% from the year ago period.

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.

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. That said, they can take comfort from the fact that BPOP is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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