All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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.

Prosperity Bancshares in Focus

Prosperity Bancshares (PB Quick QuotePB - Free Report) is headquartered in Houston, and is in the Finance sector. The stock has seen a price change of -7.38% since the start of the year. Currently paying a dividend of $0.58 per share, the company has a dividend yield of 3.32%. In comparison, the Banks - Southwest industry's yield is 1.22%, while the S&P 500's yield is 1.6%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.32 is up 2.7% from last year. In the past five-year period, Prosperity Bancshares has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.82%. 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. Prosperity Bancshares's current payout ratio is 44%. This means it paid out 44% of its trailing 12-month EPS as dividend.

PB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $5.75 per share, with earnings expected to increase 12.52% from the year ago period.

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.

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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, PB 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).