Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

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 Mid-Illinois Bancshares in Focus

Headquartered in Mattoon, First Mid-Illinois Bancshares (FMBH) is a Finance stock that has seen a price change of 14.17% so far this year. Currently paying a dividend of $0.2 per share, the company has a dividend yield of 2.13%. In comparison, the Banks - Northeast industry's yield is 1.99%, while the S&P 500's yield is 1.35%.

Taking a look at the company's dividend growth, its current annualized dividend of $0.82 is up 1.2% from last year. First Mid-Illinois Bancshares has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 19.70%. 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. First Mid-Illinois's current payout ratio is 28%. This means it paid out 28% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for FMBH for this fiscal year. The Zacks Consensus Estimate for 2021 is $3.47 per share, which represents a year-over-year growth rate of 28.52%.

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.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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, FMBH 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).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
First MidIllinois Bancshares, Inc. (FMBH) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research