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.

Honeywell International Inc. In Focus

Headquartered in Charlotte, Honeywell International Inc. (HON Quick QuoteHON - Free Report) is a Conglomerates stock that has seen a price change of -6.37% so far this year. The company is currently shelling out a dividend of $1.03 per share, with a dividend yield of 2.05%. This compares to the Diversified Operations industry's yield of 0.15% and the S&P 500's yield of 1.68%.

Looking at dividend growth, the company's current annualized dividend of $4.12 is up 3.8% from last year. In the past five-year period, Honeywell International Inc. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.44%. 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. Honeywell International Inc.'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, HON expects solid earnings growth. The Zacks Consensus Estimate for 2023 is $9.16 per share, which represents a year-over-year growth rate of 4.57%.

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. However, not all companies offer 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, HON 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).