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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 in Focus
Headquartered in Clayton, Enterprise Financial Services (EFSC) is a Finance stock that has seen a price change of -1.38% so far this year. The financial holding company is paying out a dividend of $0.29 per share at the moment, with a dividend yield of 2.09% compared to the Banks - Midwest industry's yield of 3.24% and the S&P 500's yield of 1.56%.
Looking at dividend growth, the company's current annualized dividend of $1.16 is up 9.4% 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 11.14%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Enterprise Financial Services's payout ratio is 23%, which means it paid out 23% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, EFSC expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $4.93 per share, which represents a year-over-year growth rate of 1.02%.
Bottom Line
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.
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 presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).