Enterprise Financial Services Corp (NASDAQ:EFSC) will increase its dividend from last year’s comparable payment on the 31st of December to $0.28. Despite this raise, the dividend yield of 2.1% is only a modest boost to shareholder returns.
See our latest analysis for Enterprise Financial Services
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 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 3 years, EPS is forecast to expand by 3.9%. Analysts estimate the future payout ratio will be 23% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
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. Since 2014, the annual payment back then was $0.21, compared to the most recent full-year payment of $1.12. This works out to be a compound annual growth rate (CAGR) of approximately 18% 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.
Investors could be attracted to the stock based on the quality of its payment history. Enterprise Financial Services has impressed us by growing EPS at 6.6% per 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.
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we’ve picked out 1 warning sign for Enterprise Financial Services that investors should take into consideration. 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.
