Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
Headquartered in Clayton, Enterprise Financial Services (EFSC) is a Finance stock that has seen a price change of 6.54% so far this year. Currently paying a dividend of $0.33 per share, the company has a dividend yield of 2.29%. In comparison, the Banks - Midwest industry's yield is 2.69%, while the S&P 500's yield is 1.39%.
Looking at dividend growth, the company's current annualized dividend of $1.32 is up 8.2% from last year. Over the last 5 years, Enterprise Financial Services has increased its dividend 4 times on a year-over-year basis for an average annual increase of 11.88%. Looking ahead, future dividend growth will be dependent on earnings growth and 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 24%, meaning it paid out 24% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, EFSC expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $5.53 per share, representing a year-over-year earnings growth rate of 5.53%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that EFSC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Enterprise Financial Services Corporation (EFSC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).