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 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.

National Bank Holdings in Focus

Headquartered in Greenwood Village, National Bank Holdings (NBHC) is a Finance stock that has seen a price change of 1.16% so far this year. Currently paying a dividend of $0.29 per share, the company has a dividend yield of 2.66%. In comparison, the Banks - Southeast industry's yield is 2.26%, while the S&P 500's yield is 1.49%.

In terms of dividend growth, the company's current annualized dividend of $1.16 is up 3.6% from last year. In the past five-year period, National Bank Holdings has increased its dividend 4 times on a year-over-year basis for an average annual increase of 8.80%. 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. National Bank Holdings's current payout ratio is 36%, meaning it paid out 36% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for NBHC for this fiscal year. The Zacks Consensus Estimate for 2025 is $3.31 per share, representing a year-over-year earnings growth rate of 2.80%.

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. But, not every company offers 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. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, NBHC 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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