Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Manulife Financial in Focus

Manulife Financial (MFC) is headquartered in Toronto, and is in the Finance sector. The stock has seen a price change of -10.75% since the start of the year. The financial services company is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 4.44% compared to the Insurance - Life Insurance industry's yield of 1.68% and the S&P 500's yield of 1.76%.

Looking at dividend growth, the company's current annualized dividend of $1.22 is up 3% from last year. Over the last 5 years, Manulife Financial has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.83%. 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. Right now, Manulife's payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, MFC expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $2.92 per share, representing a year-over-year earnings growth rate of 3.55%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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 MFC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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Manulife Financial Corp (MFC) : Free Stock Analysis Report

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

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