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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 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.

Cincinnati Financial in Focus

Headquartered in Fairfield, Cincinnati Financial (CINF) is a Finance stock that has seen a price change of 13.19% so far this year. The insurer is paying out a dividend of $0.81 per share at the moment, with a dividend yield of 2.77% compared to the Insurance - Property and Casualty industry's yield of 0.37% and the S&P 500's yield of 1.58%.

Taking a look at the company's dividend growth, its current annualized dividend of $3.24 is up 8% from last year. Cincinnati Financial has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.71%. 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. Cincinnati Financial's current payout ratio is 47%, meaning it paid out 47% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, CINF expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $6.37 per share, representing a year-over-year earnings growth rate of 5.64%.

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. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CINF 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).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.