All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

Central Pacific Financial in Focus

Central Pacific Financial (CPF) is headquartered in Honolulu, and is in the Finance sector. The stock has seen a price change of -6.68% since the start of the year. The operator of Central Pacific Bank is paying out a dividend of $0.27 per share at the moment, with a dividend yield of 3.98% compared to the Banks - West industry's yield of 3.05% and the S&P 500's yield of 1.57%.

In terms of dividend growth, the company's current annualized dividend of $1.08 is up 3.8% from last year. In the past five-year period, Central Pacific Financial has increased its dividend 2 times on a year-over-year basis for an average annual increase of 3.26%. 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, Central Pacific Financial's payout ratio is 44%, which means it paid out 44% of its trailing 12-month EPS as dividend.

CPF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $2.75 per share, with earnings expected to increase 17.52% from the year ago period.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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 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 CPF is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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

CPB Inc. (CPF) : Free Stock Analysis Report

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

Zacks Investment Research