Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

First Financial Corp. In Focus

Headquartered in Terre Haute, First Financial Corp. (THFF Quick QuoteTHFF - Free Report) is a Finance stock that has seen a price change of 14.74% so far this year. The holding company for First Financial Bank is currently shelling out a dividend of $0.51 per share, with a dividend yield of 3.85%. This compares to the Banks - Midwest industry's yield of 3.14% and the S&P 500's yield of 1.52%.

Looking at dividend growth, the company's 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%. 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. First Financial Corp.'s current payout ratio is 44%, meaning it paid out 44% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, THFF expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $6.02 per share, which represents a year-over-year growth rate of 50.50%.

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.

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. 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 #1 (Strong Buy).