Enterprise Financial Services' (NASDAQ:EFSC) Upcoming Dividend Will Be Larger Than Last Year's

Enterprise Financial Services Corp (NASDAQ:EFSC) will increase its dividend from last year's comparable payment on the 30th of June to $0.25. Although the dividend is now higher, the yield is only 2.6%, which is below the industry average.

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. Enterprise Financial Services' stock price has reduced by 30% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for Enterprise Financial Services

Enterprise Financial Services' Payment Expected To Have Solid Earnings Coverage

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

Having distributed dividends for at least 10 years, Enterprise Financial Services has a long history of paying out a part of its 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 year, EPS is forecast to fall by 1.7%. But if the dividend continues along recent trends, we estimate the future payout ratio could be 20%, 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 2013 to the most recent total annual payment of $1.00. This means that it has been growing its distributions at 17% per annum 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Enterprise Financial Services has grown earnings per share at 18% 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

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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 of these factors considered, we think this has solid potential as a dividend stock.

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 example, we've picked out 1 warning sign for Enterprise Financial Services that investors should know about before committing capital to this stock. 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.