All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But 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.

First Busey in Focus

Based in Champaign, First Busey (BUSE Quick QuoteBUSE - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -15.15%. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 5%. In comparison, the Banks - Midwest industry's yield is 3.6%, while the S&P 500's yield is 1.68%.

Taking a look at the company's dividend growth, its 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%. 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. Right now, First Busey's payout ratio is 46%, which 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 $2.54 per share, representing a year-over-year earnings growth rate of 22.12%.

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, 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).