Enterprise Financial Services Corp's (NASDAQ:EFSC) dividend will be increasing from last year's payment of the same period to $0.32 on 31st of December. Despite this raise, the dividend yield of 2.3% is only a modest boost to shareholder returns.

Enterprise Financial Services' Dividend Forecasted To Be Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive.

Enterprise Financial Services has a long history of paying out dividends, with its current track record at a minimum of 10 years. Using data from its latest earnings report, Enterprise Financial Services' payout ratio sits at 23%, an extremely comfortable number that shows that it can pay its dividend.

The next 3 years are set to see EPS grow by 16.6%. Analysts estimate the future payout ratio will be 24% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

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 2015 to the most recent total annual payment of $1.28. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Enterprise Financial Services has been growing its earnings per share at 13% a 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.

We Really Like Enterprise Financial Services' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. Is Enterprise Financial Services not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.