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.

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

Headquartered in Leawood, First Busey (BUSE) is a Finance stock that has seen a price change of -4.54% so far this year. The bank holding company is currently shelling out a dividend of $0.25 per share, with a dividend yield of 4.44%. This compares to the Banks - Midwest industry's yield of 3.07% and the S&P 500's yield of 1.53%.

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

BUSE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $2.56 per share, which represents a year-over-year growth rate of 23.08%.

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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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