Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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 Busey in Focus

First Busey (BUSE) is headquartered in Champaign, and is in the Finance sector. The stock has seen a price change of -7.98% since the start of the year. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 4.61%. In comparison, the Banks - Midwest industry's yield is 3.28%, while the S&P 500's yield is 1.6%.

In terms of dividend growth, the company's current annualized dividend of $1 is up 4.2% from last year. Over the last 5 years, First Busey has increased its dividend 3 times on a year-over-year basis for an average annual increase of 2.21%. 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. First Busey's current payout ratio is 46%. This means it paid out 46% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, BUSE expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $2.55 per share, with earnings expected to increase 22.60% from the year ago period.

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. But, not every company offers 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. 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, BUSE 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).

Story Continues

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

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