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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.

Genuine Parts in Focus

Based in Atlanta, Genuine Parts (GPC) is in the Auto-Tires-Trucks sector, and so far this year, shares have seen a price change of 0.43%. Currently paying a dividend of $1 per share, the company has a dividend yield of 2.88%. In comparison, the Automotive - Replacement Parts industry's yield is 2.83%, while the S&P 500's yield is 1.6%.

In terms of dividend growth, the company's current annualized dividend of $4 is up 5.3% from last year. In the past five-year period, Genuine Parts has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6%. 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, Genuine Parts's payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for GPC for this fiscal year. The Zacks Consensus Estimate for 2024 is $9.92 per share, representing a year-over-year earnings growth rate of 6.32%.

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.

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. Income investors must be conscious 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 GPC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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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.