All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. However, 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 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 (EFSC) is headquartered in Clayton, and is in the Finance sector. The stock has seen a price change of 21.33% since the start of the year. The financial holding company is currently shelling out a dividend of $0.34 per share, with a dividend yield of 2.08%. This compares to the Banks - Midwest industry's yield of 2.6% and the S&P 500's yield of 1.45%.
Looking at dividend growth, the company's current annualized dividend of $1.36 is up 11.5% 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.
EFSC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2026 is $5.57 per share, representing a year-over-year earnings growth rate of 6.30%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. 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).