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.

First Financial Corp. In Focus

First Financial Corp. (THFF Quick QuoteTHFF - Free Report) is headquartered in Terre Haute, and is in the Finance sector. The stock has seen a price change of 11.41% since the start of the year. The holding company for First Financial Bank is paying out a dividend of $0.51 per share at the moment, with a dividend yield of 3.96% compared to the Banks - Midwest industry's yield of 3.17% and the S&P 500's yield of 1.54%.

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

THFF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $6.02 per share, representing a year-over-year earnings growth rate of 50.50%.

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.

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. That said, they can take comfort from the fact that THFF is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).