Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

VALE S.A. In Focus

VALE S.A. (VALE) is headquartered in Rio De Janeiro, and is in the Basic Materials sector. The stock has seen a price change of 14.43% since the start of the year. Currently paying a dividend of $0.07 per share, the company has a dividend yield of 9.05%. In comparison, the Mining - Iron industry's yield is 9.41%, while the S&P 500's yield is 1.52%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.92 is up 0.2% from last year. VALE S.A. has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 10.53%. 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, VALE's payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.

VALE is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $1.85 per share, which represents a year-over-year growth rate of 1.65%.

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. It's important to keep in mind that not all companies provide 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, VALE 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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