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.

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

Banco Santander-Chile in Focus

Based in Santiago Chile, Banco Santander-Chile (BSAC) is in the Finance sector, and so far this year, shares have seen a price change of 30.7%. Currently paying a dividend of $0.99 per share, the company has a dividend yield of 4.02%. In comparison, the Banks - Foreign industry's yield is 3.97%, while the S&P 500's yield is 1.54%.

Looking at dividend growth, the company's current annualized dividend of $0.99 is up 74% from last year. Over the last 5 years, Banco Santander-Chile has increased its dividend 3 times on a year-over-year basis for an average annual increase of 9.01%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Banco Santander-Chile's current payout ratio is 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.

BSAC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $2.22 per share, which represents a year-over-year growth rate of 18.09%.

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.

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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that BSAC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

Story Continues

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

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