Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Enterprise Financial Services Corp (NASDAQ:EFSC) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 13th of March in order to be eligible for this dividend, which will be paid on the 31st of March.
Enterprise Financial Services's next dividend payment will be US$0.18 per share, and in the last 12 months, the company paid a total of US$0.72 per share. Based on the last year's worth of payments, Enterprise Financial Services has a trailing yield of 2.0% on the current stock price of $35.82. If you buy this business for its dividend, you should have an idea of whether Enterprise Financial Services's dividend is reliable and sustainable. As a result, readers should always check whether Enterprise Financial Services has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. 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.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Enterprise Financial Services has grown its earnings rapidly, up 21% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past ten years, Enterprise Financial Services has increased its dividend at approximately 13% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
From a dividend perspective, should investors buy or avoid Enterprise Financial Services? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. 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. To help with this, we've discovered 2 warning signs for Enterprise Financial Services that you should be aware of before investing in their shares.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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