Enterprise Financial Services Corp (NASDAQ:EFSC) will increase its dividend from last year's comparable payment on the 30th of September to $0.27. This takes the annual payment to 2.2% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Enterprise Financial Services

Enterprise Financial Services' Payment Expected To Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having distributed dividends for at least 10 years, Enterprise Financial Services has a long history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, Enterprise Financial Services' latest earnings report puts its payout ratio at 22%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS is forecast to fall by 0.4%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 26%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Enterprise Financial Services Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.21, compared to the most recent full-year payment of $1.08. This means that it has been growing its distributions at 18% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See Enterprise Financial Services' Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Enterprise Financial Services has grown earnings per share at 6.6% per year over the past five years. Enterprise Financial Services definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Enterprise Financial Services' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.