Enterprise Financial Services Corp (NASDAQ:EFSC) will increase its dividend from last year's comparable payment on the 30th of September to $0.27. Despite this raise, the dividend yield of 2.0% is only a modest boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Enterprise Financial Services' stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Enterprise Financial Services

Enterprise Financial Services' Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Enterprise Financial Services has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 22% also shows that Enterprise Financial Services is able to comfortably pay dividends.

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. The dividend has gone from an annual total of $0.21 in 2014 to the most recent total annual payment of $1.08. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Enterprise Financial Services Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Enterprise Financial Services has grown earnings per share at 6.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Enterprise Financial Services' prospects of growing its dividend payments in the future.

Enterprise Financial Services Looks Like A Great Dividend Stock

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.