Why Enterprise Financial Services (EFSC) is a Great Dividend Stock Right Now
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Enterprise Financial Services in Focus
Headquartered in Clayton, Enterprise Financial Services (EFSC) is a Finance stock that has seen a price change of -9.09% so far this year. Currently paying a dividend of $0.25 per share, the company has a dividend yield of 2.25%. In comparison, the Banks - Midwest industry's yield is 3.44%, while the S&P 500's yield is 1.76%.
Taking a look at the company's dividend growth, its current annualized dividend of $1 is up 11.1% from last year. Enterprise Financial Services has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 16.18%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Enterprise Financial Services's current payout ratio is 18%. This means it paid out 18% of its trailing 12-month EPS as dividend.
EFSC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $5.59 per share, with earnings expected to increase 5.47% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EFSC is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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