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.

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.

Simmons First National in Focus

Simmons First National (SFNC) is headquartered in Pine Bluff, and is in the Finance sector. The stock has seen a price change of -5.82% since the start of the year. The bank holding company is paying out a dividend of $0.21 per share at the moment, with a dividend yield of 4.07% compared to the Banks - Southeast industry's yield of 2.4% and the S&P 500's yield of 1.58%.

In terms of dividend growth, the company's current annualized dividend of $0.85 is up 1.2% from last year. In the past five-year period, Simmons First National has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.21%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Simmons First National's current payout ratio is 60%. This means it paid out 60% of its trailing 12-month EPS as dividend.

SFNC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $1.59 per share, representing a year-over-year earnings growth rate of 12.77%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, SFNC 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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Simmons First National Corporation (SFNC) : Free Stock Analysis Report

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

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