Enterprise Financial Services (NASDAQ:EFSC) Is Increasing Its Dividend To $0.27

Enterprise Financial Services Corp's (NASDAQ:EFSC) dividend will be increasing from last year's payment of the same period to $0.27 on 30th of September. Despite this raise, the dividend yield of 2.0% is only a modest boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Enterprise Financial Services' stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Enterprise Financial Services

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 data isn't a guarantee for the future, Enterprise Financial Services' latest earnings report puts its payout ratio at 22%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS is forecast to fall by 0.4%. But if the dividend continues along recent trends, we estimate the future payout ratio could be 26%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Enterprise Financial Services Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.21 in 2014 to the most recent total annual payment of $1.08. This means that it has been growing its distributions at 18% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Enterprise Financial Services Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Enterprise Financial Services has been growing its earnings per share at 6.6% a 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.

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. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Enterprise Financial Services that investors should take into consideration. 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.

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