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 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.

NiSource in Focus

NiSource (NI) is headquartered in Merrillville, and is in the Utilities sector. The stock has seen a price change of 5.55% since the start of the year. Currently paying a dividend of $0.28 per share, the company has a dividend yield of 2.89%. In comparison, the Utility - Electric Power industry's yield is 3.28%, while the S&P 500's yield is 1.53%.

In terms of dividend growth, the company's current annualized dividend of $1.12 is up 5.7% from last year. NiSource has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.87%. 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, NiSource's payout ratio is 59%, which means it paid out 59% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, NI expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $1.87 per share, representing a year-over-year earnings growth rate of 6.86%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. With that in mind, NI presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).

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