Enterprise Financial Services (NASDAQ:EFSC) Is Increasing Its Dividend To $0.25

The board of Enterprise Financial Services Corp (NASDAQ:EFSC) has announced that it will be paying its dividend of $0.25 on the 30th of June, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 2.4% is only a modest boost to shareholder returns.

Check out our latest analysis for Enterprise Financial Services

Enterprise Financial Services' Earnings Will Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end.

Enterprise Financial Services has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Using data from its latest earnings report, Enterprise Financial Services' payout ratio sits at 17%, an extremely comfortable number that shows that it can pay its dividend.

Over the next year, EPS is forecast to fall by 0.8%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 20%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Enterprise Financial Services Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $0.21 total annually to $1.00. This means that it has been growing its distributions at 17% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Enterprise Financial Services has seen EPS rising for the last five years, at 18% per annum. 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, a dividend increase is always good, and we think that Enterprise Financial Services is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Enterprise Financial Services (of which 1 is a bit unpleasant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.