Are You Looking for a High-Growth Dividend Stock?

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.

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

First Financial Corp. In Focus

Based in Terre Haute, First Financial Corp. (THFF) is in the Finance sector, and so far this year, shares have seen a price change of 8.57%. Currently paying a dividend of $0.51 per share, the company has a dividend yield of 4.07%. In comparison, the Banks - Midwest industry's yield is 3.24%, while the S&P 500's yield is 1.57%.

In terms of dividend growth, the company's current annualized dividend of $2.04 is up 51.1% from last year. First Financial Corp. has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 13.25%. 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. First Financial Corp.'s current payout ratio is 45%, meaning it paid out 45% of its trailing 12-month EPS as dividend.

THFF is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $5.56 per share, representing a year-over-year earnings growth rate of 39%.

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. But, not every company offers 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. That said, they can take comfort from the fact that THFF is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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