Enterprise Financial Services (NASDAQ:EFSC) Is Increasing Its Dividend To $0.24

Enterprise Financial Services Corp's (NASDAQ:EFSC) dividend will be increasing from last year's payment of the same period to $0.24 on 30th of December. Although the dividend is now higher, the yield is only 1.8%, which is below the industry average.

Our analysis indicates that EFSC is potentially undervalued!

Enterprise Financial Services' Payment Expected To Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Enterprise Financial Services has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 17% also shows that Enterprise Financial Services is able to comfortably pay dividends.

Over the next 3 years, EPS is forecast to expand by 19.5%. Analysts estimate the future payout ratio will be 17% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

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 annual payment during the last 10 years was $0.21 in 2012, and the most recent fiscal year payment was $0.96. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Enterprise Financial Services has grown earnings per share at 16% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Enterprise Financial Services Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for Enterprise Financial Services for free with public analyst estimates for the company. Is Enterprise Financial Services not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.