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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Aflac in Focus

Based in Columbus, Aflac (AFL) is in the Finance sector, and so far this year, shares have seen a price change of 4.07%. The insurer is paying out a dividend of $0.5 per share at the moment, with a dividend yield of 2.33% compared to the Insurance - Accident and Health industry's yield of 2.55% and the S&P 500's yield of 1.54%.

Taking a look at the company's dividend growth, its current annualized dividend of $2 is up 19% from last year. Aflac has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 12.68%. 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, Aflac's payout ratio is 27%, which means it paid out 27% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, AFL expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $6.43 per share, representing a year-over-year earnings growth rate of 3.21%.

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