Esquire Financial Holdings, Inc. (NASDAQ:ESQ) will increase its dividend from last year's comparable payment on the 2nd of March to $0.20. Despite this raise, the dividend yield of 0.7% is only a modest boost to shareholder returns.

Esquire Financial Holdings' Dividend Forecasted To Be Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Esquire Financial Holdings is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. Despite the company's shorter dividend history however, calculating for its payout ratio of 11% shows that Esquire Financial Holdings is able to comfortably pay dividends.

The next 3 years are set to see EPS grow by 14.0%. The future payout ratio could be 11% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Esquire Financial Holdings Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2022, the dividend has gone from $0.36 total annually to $0.80. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Esquire Financial Holdings has grown earnings per share at 30% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Esquire Financial Holdings' 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 easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. If you are a dividend investor, you might also want to look at our curated list of high yield 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.