Enterprise Financial Services' (NASDAQ:EFSC) Dividend Will Be Increased To US$0.20
Enterprise Financial Services Corp (NASDAQ:EFSC) has announced that it will be increasing its dividend on the 31st of December to US$0.20. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.
Check out our latest analysis for Enterprise Financial Services
Enterprise Financial Services' Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Enterprise Financial Services' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 18.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.
Enterprise Financial Services Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from US$0.21 in 2011 to the most recent annual payment of US$0.80. This means that it has been growing its distributions at 14% 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's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 4.8% per annum over the last five years, which admittedly is a bit slow. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
We'd also point out that Enterprise Financial Services has issued stock equal to 46% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Enterprise Financial Services that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
