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

Cash flow can come from bond interest, interest from other types of investments, and of course, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

First United Corporation in Focus

Headquartered in Oakland, First United Corporation (FUNC Quick QuoteFUNC - Free Report) is a Finance stock that has seen a price change of 11.66% so far this year. The company is currently shelling out a dividend of $0.22 per share, with a dividend yield of 2.34%. This compares to the Banks - Northeast industry's yield of 2.54% and the S&P 500's yield of 1.56%.

In terms of dividend growth, the company's current annualized dividend of $0.88 is up 7.3% from last year. In the past five-year period, First United Corporation has increased its dividend 3 times on a year-over-year basis for an average annual increase of 12.66%. 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. First United's current payout ratio is 27%, meaning it paid out 27% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for FUNC for this fiscal year. The Zacks Consensus Estimate for 2025 is $3.75 per share, representing a year-over-year earnings growth rate of 16.82%.

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 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 FUNC is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).