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.

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.

German American Bancorp in Focus

German American Bancorp (GABC) is headquartered in Jasper, and is in the Finance sector. The stock has seen a price change of -2.46% since the start of the year. The financial services holding company is currently shelling out a dividend of $0.29 per share, with a dividend yield of 2.96%. This compares to the Banks - Midwest industry's yield of 2.99% and the S&P 500's yield of 1.57%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.16 is up 7.4% from last year. Over the last 5 years, German American Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.81%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. German American Bancorp's current payout ratio is 38%, meaning it paid out 38% of its trailing 12-month EPS as dividend.

GABC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $3.27 per share, representing a year-over-year earnings growth rate of 15.55%.

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. 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 have to be mindful 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 GABC 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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German American Bancorp, Inc. (GABC) : Free Stock Analysis Report

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

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