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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Morgan Stanley in Focus

Headquartered in New York, Morgan Stanley (MS) is a Finance stock that has seen a price change of -7.72% so far this year. Currently paying a dividend of $0.93 per share, the company has a dividend yield of 3.19%. In comparison, the Financial - Investment Bank industry's yield is 1.21%, while the S&P 500's yield is 1.65%.

In terms of dividend growth, the company's current annualized dividend of $3.70 is up 4.2% from last year. In the past five-year period, Morgan Stanley has increased its dividend 4 times on a year-over-year basis for an average annual increase of 25.22%. 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. Right now, Morgan Stanley's payout ratio is 43%, which means it paid out 43% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, MS expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $8.61 per share, representing a year-over-year earnings growth rate of 8.30%.

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.

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. With that in mind, MS 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).

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

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.