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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

First Busey in Focus

First Busey (BUSE) is headquartered in Champaign, and is in the Finance sector. The stock has seen a price change of 6.28% since the start of the year. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 3.99%. In comparison, the Banks - Midwest industry's yield is 2.9%, while the S&P 500's yield is 1.54%.

Looking at dividend growth, the company's current annualized dividend of $1 is up 4.2% from last year. In the past five-year period, First Busey has increased its dividend 3 times on a year-over-year basis for an average annual increase of 2.11%. 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. First Busey's current payout ratio is 46%. This means it paid out 46% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, BUSE expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $2.61 per share, representing a year-over-year earnings growth rate of 25.48%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that BUSE is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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