Enterprise Financial Services (NASDAQ:EFSC) Is Increasing Its Dividend To US$0.21

Enterprise Financial Services Corp (NASDAQ:EFSC) will increase its dividend on the 31st of March to US$0.21. Even though the dividend went up, the yield is still quite low at only 1.6%.

Check out our latest analysis for Enterprise Financial Services

Enterprise Financial Services' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Enterprise Financial Services was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 16.3%. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

Enterprise Financial Services Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from US$0.21 in 2012 to the most recent annual payment of US$0.84. This means that it has been growing its distributions at 15% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Enterprise Financial Services Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Enterprise Financial Services has impressed us by growing EPS at 7.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Enterprise Financial Services' prospects of growing its dividend payments in the future.

The company has also been raising capital by issuing stock equal to 44% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Enterprise Financial Services Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Enterprise Financial Services that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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