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.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

Prosperity Bancshares in Focus

Headquartered in Houston, Prosperity Bancshares (PB) is a Finance stock that has seen a price change of -14.48% so far this year. The financial holding company is currently shelling out a dividend of $0.58 per share, with a dividend yield of 3.6%. This compares to the Banks - Southwest industry's yield of 1.16% and the S&P 500's yield of 1.73%.

Looking at dividend growth, the company's current annualized dividend of $2.32 is up 2.7% from last year. Over the last 5 years, Prosperity Bancshares has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.99%. 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. Prosperity Bancshares's current payout ratio is 45%. This means it paid out 45% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for PB for this fiscal year. The Zacks Consensus Estimate for 2025 is $5.80 per share, with earnings expected to increase 13.50% 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.

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. 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, 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).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Prosperity Bancshares, Inc. (PB) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research