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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 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.

City Holding in Focus

Headquartered in Charleston, City Holding (CHCO) is a Finance stock that has seen a price change of 2.64% so far this year. The bank holding company for City National Bank of West Virginia is currently shelling out a dividend of $0.79 per share, with a dividend yield of 2.6%. This compares to the Banks - Southeast industry's yield of 2.35% and the S&P 500's yield of 1.54%.

Taking a look at the company's dividend growth, its current annualized dividend of $3.16 is up 7.7% from last year. In the past five-year period, City Holding has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.35%. 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, City Holding's payout ratio is 40%, which means it paid out 40% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for CHCO for this fiscal year. The Zacks Consensus Estimate for 2025 is $8.02 per share, representing a year-over-year earnings growth rate of 1.65%.

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. 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. That said, they can take comfort from the fact that CHCO 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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This article originally published on Zacks Investment Research (zacks.com).

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