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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 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.

AbbVie in Focus

Headquartered in North Chicago, AbbVie (ABBV) is a Medical stock that has seen a price change of 4.23% so far this year. The drugmaker is paying out a dividend of $1.55 per share at the moment, with a dividend yield of 3.84% compared to the Large Cap Pharmaceuticals industry's yield of 2.68% and the S&P 500's yield of 1.57%.

Taking a look at the company's dividend growth, its current annualized dividend of $6.20 is up 4.7% from last year. In the past five-year period, AbbVie has increased its dividend 5 times on a year-over-year basis for an average annual increase of 8.25%. 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, AbbVie's payout ratio is 57%, which means it paid out 57% of its trailing 12-month EPS as dividend.

ABBV is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $11.13 per share, which represents a year-over-year growth rate of 0.18%.

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, ABBV 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).

Zacks Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

It’s an American AI company that’s riding low right now, but it has rounded up clients like BMW, GE, Dell Computer, and Bosch. It has prospects for not just doubling but quadrupling in the year to come. Of course, all our picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.

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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.