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.

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.

National Bank Holdings in Focus

Based in Greenwood Village, National Bank Holdings (NBHC) is in the Finance sector, and so far this year, shares have seen a price change of -11.5%. Currently paying a dividend of $0.29 per share, the company has a dividend yield of 3.04%. In comparison, the Banks - Southeast industry's yield is 2.33%, while the S&P 500's yield is 1.6%.

In terms of dividend growth, the company's current annualized dividend of $1.16 is up 3.6% from last year. Over the last 5 years, National Bank Holdings has increased its dividend 4 times on a year-over-year basis for an average annual increase of 8.80%. 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. Right now, National Bank Holdings's payout ratio is 36%, which means it paid out 36% of its trailing 12-month EPS as dividend.

NBHC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $3.31 per share, which represents a year-over-year growth rate of 2.80%.

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. 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, NBHC 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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