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.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Exelon in Focus

Exelon (EXC) is headquartered in Chicago, and is in the Utilities sector. The stock has seen a price change of 17.59% since the start of the year. The energy company is paying out a dividend of $0.8 per share at the moment, with a dividend yield of 3.62% compared to the Utility - Electric Power industry's yield of 3.14% and the S&P 500's yield of 1.53%.

In terms of dividend growth, the company's current annualized dividend of $1.60 is up 5.3% from last year. Exelon has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 0.01%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Exelon's current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.

EXC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $2.70 per share, with earnings expected to increase 8% from the year ago period.

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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EXC 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).

Story Continues

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

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