All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

First Financial Corp. In Focus

First Financial Corp. (THFF Quick QuoteTHFF - Free Report) is headquartered in Terre Haute, and is in the Finance sector. The stock has seen a price change of -6.78% since the start of the year. Currently paying a dividend of $0.51 per share, the company has a dividend yield of 4.74%. In comparison, the Banks - Midwest industry's yield is 3.6%, while the S&P 500's yield is 1.64%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.04 is up 51.1% from last year. Over the last 5 years, First Financial Corp. has increased its dividend 4 times on a year-over-year basis for an average annual increase of 15.55%. 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. Right now, First Financial Corp.'s payout ratio is 45%, which means it paid out 45% of its trailing 12-month EPS as dividend.

THFF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $5.56 per share, representing a year-over-year earnings growth rate of 39%.

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. However, not all companies offer 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. With that in mind, THFF presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).