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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Exelon in Focus

Exelon (EXC Quick QuoteEXC - Free Report) is headquartered in Chicago, and is in the Utilities sector. The stock has seen a price change of 23.49% since the start of the year. The energy company is paying out a dividend of $0.4 per share at the moment, with a dividend yield of 3.44% compared to the Utility - Electric Power industry's yield of 2.98% and the S&P 500's yield of 1.6%.

Looking at dividend growth, the company's current annualized dividend of $1.60 is up 5.3% from last year. Over the last 5 years, Exelon has increased its dividend 3 times on a year-over-year basis for an average annual increase of 0.01%. 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. Exelon's current payout ratio is 58%. This means it paid out 58% of its trailing 12-month EPS as dividend.

EXC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $2.67 per share, representing a year-over-year earnings growth rate of 6.80%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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 EXC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).