Enterprise Financial Services (NASDAQ:EFSC) Could Be A Buy For Its Upcoming Dividend
Enterprise Financial Services Corp (NASDAQ:EFSC) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Enterprise Financial Services' shares before the 14th of March in order to receive the dividend, which the company will pay on the 31st of March.
The company's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Calculating the last year's worth of payments shows that Enterprise Financial Services has a trailing yield of 1.9% on the current share price of $53.94. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Enterprise Financial Services
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Enterprise Financial Services paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Enterprise Financial Services has grown its earnings rapidly, up 21% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Enterprise Financial Services has lifted its dividend by approximately 17% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Is Enterprise Financial Services worth buying for its dividend? Companies like Enterprise Financial Services that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Enterprise Financial Services ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
While it's tempting to invest in Enterprise Financial Services for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Enterprise Financial Services and you should be aware of this before buying any shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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