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

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

Bankwell Financial Group, Inc. In Focus

Based in New Canaan, Bankwell Financial Group, Inc. (BWFG) is in the Finance sector, and so far this year, shares have seen a price change of 51.82%. The company is paying out a dividend of $0.18 per share at the moment, with a dividend yield of 2.43% compared to the Banks - Northeast industry's yield of 1.93% and the S&P 500's yield of 1.37%.

Looking at dividend growth, the company's current annualized dividend of $0.72 is up 28.6% from last year. In the past five-year period, Bankwell Financial Group, Inc. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 19.73%. 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. Bankwell Financial Group, Inc.'s current payout ratio is 29%, meaning it paid out 29% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, BWFG expects solid earnings growth. The Zacks Consensus Estimate for 2021 is $3.22 per share, representing a year-over-year earnings growth rate of 329.33%.

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. 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, BWFG 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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