Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

City Holding in Focus

Based in Charleston, City Holding (CHCO Quick QuoteCHCO - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -1.43%. Currently paying a dividend of $0.79 per share, the company has a dividend yield of 2.71%. In comparison, the Banks - Southeast industry's yield is 2.5%, while the S&P 500's yield is 1.65%.

Looking at dividend growth, the company's current annualized dividend of $3.16 is up 7.7% from last year. City Holding has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.35%. 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. City Holding's current payout ratio is 40%, meaning it paid out 40% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for CHCO for this fiscal year. The Zacks Consensus Estimate for 2025 is $7.98 per share, representing a year-over-year earnings growth rate of 1.14%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that CHCO is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).