All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.

Korn/Ferry in Focus

Based in Los Angeles, Korn/Ferry (KFY) is in the Business Services sector, and so far this year, shares have seen a price change of 20.57%. The staffing company is currently shelling out a dividend of $0.37 per share, with a dividend yield of 2.07%. This compares to the Staffing Firms industry's yield of 1.73% and the S&P 500's yield of 1.45%.

In terms of dividend growth, the company's current annualized dividend of $1.48 is up 45.1% from last year. Over the last 5 years, Korn/Ferry has increased its dividend 4 times on a year-over-year basis for an average annual increase of 29.30%. 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. Korn/Ferry's current payout ratio is 31%, meaning it paid out 31% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, KFY expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $4.79 per share, with earnings expected to increase 11.92% 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. But, not every company offers 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, KFY 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).

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