Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Enterprise Financial Services (EFSC) is headquartered in Clayton, and is in the Finance sector. The stock has seen a price change of 10.78% since the start of the year. The financial holding company is currently shelling out a dividend of $0.35 per share, with a dividend yield of 2.34%. This compares to the Banks - Midwest industry's yield of 2.46% and the S&P 500's yield of 1.43%.
Looking at dividend growth, the company's current annualized dividend of $1.40 is up 14.8% 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 27%, meaning it paid out 27% 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 $5.27 per share, representing a year-over-year earnings growth rate of 0.57%.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EFSC presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong 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).