Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

First Commonwealth Financial in Focus

Based in Indiana, First Commonwealth Financial (FCF Quick QuoteFCF - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -5.85%. Currently paying a dividend of $0.14 per share, the company has a dividend yield of 3.39%. In comparison, the Banks - Northeast industry's yield is 2.82%, while the S&P 500's yield is 1.55%.

Looking at dividend growth, the company's current annualized dividend of $0.54 is up 4.9% from last year. Over the last 5 years, First Commonwealth Financial has increased its dividend 4 times on a year-over-year basis for an average annual increase of 4.10%. 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 Commonwealth Financial's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, FCF expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $1.43 per share, which represents a year-over-year growth rate of 2.14%.

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.

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. 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 FCF is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).