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.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Procter & Gamble in Focus

Procter & Gamble (PG) is headquartered in Cincinnati, and is in the Consumer Staples sector. The stock has seen a price change of 16.88% since the start of the year. The world's largest consumer products maker is paying out a dividend of $1.01 per share at the moment, with a dividend yield of 2.35% compared to the Soap and Cleaning Materials industry's yield of 2.35% and the S&P 500's yield of 1.51%.

Taking a look at the company's dividend growth, its current annualized dividend of $4.03 is up 5.2% from last year. Procter & Gamble has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.17%. 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. Right now, P&G's payout ratio is 60%, which means it paid out 60% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, PG expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $6.97 per share, with earnings expected to increase 5.77% from the year ago period.

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.

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 must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, PG 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).