All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Cullen/Frost Bankers in Focus

Cullen/Frost Bankers (CFR Quick QuoteCFR - Free Report) is headquartered in San Antonio, and is in the Finance sector. The stock has seen a price change of -3.75% since the start of the year. The financial holding company is paying out a dividend of $1 per share at the moment, with a dividend yield of 3.1% compared to the Banks - Southwest industry's yield of 1.27% and the S&P 500's yield of 1.53%.

Looking at dividend growth, the company's current annualized dividend of $4 is up 7% from last year. Over the last 5 years, Cullen/Frost Bankers has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.80%. 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. Cullen/Frost's current payout ratio is 42%. This means it paid out 42% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, CFR expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $9.21 per share, with earnings expected to increase 2.56% from the year ago period.

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. It's important to keep in mind that not all companies provide a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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 CFR is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).