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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

NatWest Group in Focus

Based in London, NatWest Group (NWG) is in the Finance sector, and so far this year, shares have seen a price change of 37.07%. The bank is paying out a dividend of $0.39 per share at the moment, with a dividend yield of 5.54% compared to the Banks - Foreign industry's yield of 3.8% and the S&P 500's yield of 1.53%.

Looking at dividend growth, the company's current annualized dividend of $0.77 is up 75% from last year. Over the last 5 years, NatWest Group has increased its dividend 5 times on a year-over-year basis for an average annual increase of 46.32%. 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. Right now, NatWest's payout ratio is 52%, which means it paid out 52% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for NWG for this fiscal year. The Zacks Consensus Estimate for 2025 is $1.56 per share, representing a year-over-year earnings growth rate of 17.29%.

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. However, not all companies offer a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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 NWG is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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