Enterprise Financial Services (NASDAQ:EFSC) Will Pay A Larger Dividend Than Last Year At $0.27

The board of Enterprise Financial Services Corp (NASDAQ:EFSC) has announced that it will be paying its dividend of $0.27 on the 30th of September, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 2.2% is only a modest boost to shareholder returns.

View our latest analysis for Enterprise Financial Services

Enterprise Financial Services' Payment Expected To Have 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.

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.

EPS is set to fall by 0.4% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 26%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

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 an annual total of $0.21 in 2014 to the most recent total annual payment of $1.08. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

We Could See Enterprise Financial Services' Dividend Growing

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 6.6% per year over the past five years. Enterprise Financial Services definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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 earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Case in point: We've spotted 2 warning signs for Enterprise Financial Services (of which 1 is significant!) 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.