Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 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.

Washington Federal in Focus

Based in Seattle, Washington Federal (WAFD) is in the Finance sector, and so far this year, shares have seen a price change of 4.25%. The holding company for Washington Federal Savings Bank is paying out a dividend of $0.23 per share at the moment, with a dividend yield of 2.64% compared to the Banks - West industry's yield of 2.03% and the S&P 500's yield of 1.38%.

In terms of dividend growth, the company's current annualized dividend of $0.92 is up 1.1% from last year. Over the last 5 years, Washington Federal has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.14%. 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. Washington Federal's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.

WAFD is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $2.92 per share, with earnings expected to increase 22.18% 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. It's important to keep in mind that not all companies provide 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 WAFD 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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