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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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Enterprise Financial Services in Focus
Based in Clayton, Enterprise Financial Services (EFSC) is in the Finance sector, and so far this year, shares have seen a price change of -3.32%. The financial holding company is currently shelling out a dividend of $0.28 per share, with a dividend yield of 2.05%. This compares to the Banks - Midwest industry's yield of 3.18% and the S&P 500's yield of 1.58%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.12 is up 5.7% from last year. Over the last 5 years, Enterprise Financial Services has increased its dividend 5 times on a year-over-year basis for an average annual increase of 11.14%. Future dividend growth will depend on earnings growth as well as 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 23%. This 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 $4.98 per share, with earnings expected to increase 2.05% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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 also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).