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.
Based in Clayton, Enterprise Financial Services (EFSC) is in the Finance sector, and so far this year, shares have seen a price change of 10.3%. The financial holding company is paying out a dividend of $0.33 per share at the moment, with a dividend yield of 2.22% compared to the Banks - Midwest industry's yield of 2.57% and the S&P 500's yield of 1.43%.
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 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for EFSC for this fiscal year. The Zacks Consensus Estimate for 2026 is $5.55 per share, representing a year-over-year earnings growth rate of 5.92%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. 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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Enterprise Financial Services Corporation (EFSC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).