First Business Financial Services (FBIZ) Could Be a Great Choice

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.

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.

First Business Financial Services (FBIZ) is headquartered in Madison, and is in the Finance sector. The stock has seen a price change of 17.31% since the start of the year. The bank holding company for First Business Bank and First Business Bank-Milwaukee is currently shelling out a dividend of $0.34 per share, with a dividend yield of 2.13%. This compares to the Banks - Midwest industry's yield of 2.49% and the S&P 500's yield of 1.35%.

Looking at dividend growth, the company's current annualized dividend of $1.36 is up 17.2% from last year. Over the last 5 years, First Business Financial Services has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.22%. 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 Business Financial Services's current payout ratio is 22%, meaning it paid out 22% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, FBIZ expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $6.21 per share, with earnings expected to increase 4.55% from the year ago period.

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide 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. With that in mind, FBIZ 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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