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.

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.

Reinsurance Group in Focus

Headquartered in Chesterfield, Reinsurance Group (RGA Quick QuoteRGA - Free Report) is a Finance stock that has seen a price change of 6.97% so far this year. The reinsurance company is paying out a dividend of $0.85 per share at the moment, with a dividend yield of 2.24% compared to the Insurance - Life Insurance industry's yield of 0.06% and the S&P 500's yield of 1.7%.

In terms of dividend growth, the company's current annualized dividend of $3.40 is up 11.1% from last year. Reinsurance Group has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 6.21%. 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. Reinsurance Group's current payout ratio is 18%. This means it paid out 18% of its trailing 12-month EPS as dividend.

RGA is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $18.15 per share, with earnings expected to increase 25.78% from the year ago period.

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.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, RGA 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).