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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

German American Bancorp in Focus

German American Bancorp (GABC Quick QuoteGABC - Free Report) is headquartered in Jasper, and is in the Finance sector. The stock has seen a price change of -13.08% since the start of the year. The financial services holding company is paying out a dividend of $0.29 per share at the moment, with a dividend yield of 3.32% compared to the Banks - Midwest industry's yield of 3.26% and the S&P 500's yield of 1.73%.

In terms of dividend growth, the company's current annualized dividend of $1.16 is up 7.4% from last year. In the past five-year period, German American Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.81%. 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. German American Bancorp's current payout ratio is 38%, meaning it paid out 38% of its trailing 12-month EPS as dividend.

GABC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $3.27 per share, representing a year-over-year earnings growth rate of 15.55%.

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.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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 GABC is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).