Why First Merchants (FRME) is a Top Dividend Stock for Your Portfolio

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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.First Merchants in FocusFirst Merchants (FRME) is headquartered in Muncie, and is in the Finance sector. The stock has seen a price change of 2.43% since the start of the year. Currently paying a dividend of $0.35 per share, the company has a dividend yield of 3.43%. In comparison, the Banks - Midwest industry's yield is 3.2%, while the S&P 500's yield is 1.58%.Taking a look at the company's dividend growth, its current annualized dividend of $1.40 is up 0.7% from last year. Over the last 5 years, First Merchants has increased its dividend 4 times on a year-over-year basis for an average annual increase of 7.79%. 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, First Merchants's payout ratio is 40%, which means it paid out 40% of its trailing 12-month EPS as dividend.Earnings growth looks solid for FRME for this fiscal year. The Zacks Consensus Estimate for 2025 is $3.85 per share, representing a year-over-year earnings growth rate of 10.95%.Bottom LineInvestors 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.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 FRME is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report First Merchants Corporation (FRME): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks