All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

Novartis in Focus

Headquartered in Basel, Novartis (NVS) is a Medical stock that has seen a price change of 13.93% so far this year. The drugmaker is currently shelling out a dividend of $2.52 per share, with a dividend yield of 2.27%. This compares to the Large Cap Pharmaceuticals industry's yield of 2.53% and the S&P 500's yield of 1.69%.

Looking at dividend growth, the company's current annualized dividend of $2.52 is up 3.7% from last year. In the past five-year period, Novartis has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.93%. 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. Novartis's current payout ratio is 31%. This means it paid out 31% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, NVS expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $8.51 per share, representing a year-over-year earnings growth rate of 8.96%.

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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, NVS 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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This article originally published on Zacks Investment Research (zacks.com).

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