The board of Enterprise Financial Services Corp (NASDAQ:EFSC) has announced that it will be increasing its dividend by 4.0% on the 28th of June to $0.26, up from last year's comparable payment of $0.25. This takes the annual payment to 2.6% of the current stock price, which is about average for the industry.

View our latest analysis for Enterprise Financial Services

Enterprise Financial Services' Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

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. Using data from its latest earnings report, Enterprise Financial Services' payout ratio sits at 21%, an extremely comfortable number that shows that it can pay its dividend.

Over the next year, EPS is forecast to fall by 2.8%. But if the dividend continues along recent trends, we estimate the future payout ratio could be 26%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Enterprise Financial Services Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.21 in 2014 to the most recent total annual payment of $1.00. This implies that the company grew its distributions at a yearly rate of about 17% 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.

We Could See Enterprise Financial Services' Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Enterprise Financial Services has grown earnings per share at 5.2% 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 earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.