Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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.

TD Ameritrade in Focus

Headquartered in Omaha, TD Ameritrade (AMTD) is a Finance stock that has seen a price change of -5.3% so far this year. Currently paying a dividend of $0.3 per share, the company has a dividend yield of 2.48%. In comparison, the Financial - Investment Bank industry's yield is 0.95%, while the S&P 500's yield is 2.04%.

Taking a look at the company's dividend growth, its current annualized dividend of $1.20 is up 42.9% from last year. In the past five-year period, TD Ameritrade has increased its dividend 5 times on a year-over-year basis for an average annual increase of 13.35%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. TD Ameritrade's current payout ratio is 25%. This means it paid out 25% of its trailing 12-month EPS as dividend.

AMTD is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2018 is $3.99 per share, with earnings expected to increase 19.46% from the year ago period.

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. However, not all companies offer 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. That said, they can take comfort from the fact that AMTD 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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