Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.

Northrim BanCorp in Focus

Headquartered in Anchorage, Northrim BanCorp (NRIM) is a Finance stock that has seen a price change of -5.43% so far this year. The holding company for Northrim Bank is currently shelling out a dividend of $1.26 per share, with a dividend yield of 3.47%. This compares to the Banks - West industry's yield of 3.05% and the S&P 500's yield of 1.58%.

Looking at dividend growth, the company's current annualized dividend of $2.56 is up 4.1% from last year. In the past five-year period, Northrim BanCorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 17.33%. 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. Northrim's current payout ratio is 37%, meaning it paid out 37% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, NRIM expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $8.05 per share, which represents a year-over-year growth rate of 21.60%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. With that in mind, NRIM 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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Northrim BanCorp Inc (NRIM) : Free Stock Analysis Report

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

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