Are You Looking for a High-Growth Dividend Stock?

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

1st Source in Focus

1st Source (SRCE) is headquartered in South Bend, and is in the Finance sector. The stock has seen a price change of 5.36% since the start of the year. The holding company for 1st Source Bank is currently shelling out a dividend of $0.38 per share, with a dividend yield of 2.47%. This compares to the Banks - Midwest industry's yield of 3.13% and the S&P 500's yield of 1.56%.

Looking at dividend growth, the company's current annualized dividend of $1.52 is up 8.6% from last year. Over the last 5 years, 1st Source has increased its dividend 4 times on a year-over-year basis for an average annual increase of 5.43%. 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. 1st Source's current payout ratio is 25%. This means it paid out 25% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, SRCE expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $5.93 per share, which represents a year-over-year growth rate of 8.01%.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that SRCE 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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