Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Enterprise Financial Services in Focus

Enterprise Financial Services (EFSC Quick QuoteEFSC - Free Report) is headquartered in Clayton, and is in the Finance sector. The stock has seen a price change of -8.39% since the start of the year. The financial holding company is currently shelling out a dividend of $0.29 per share, with a dividend yield of 2.24%. This compares to the Banks - Midwest industry's yield of 3.28% and the S&P 500's yield of 1.64%.

In terms of dividend growth, the company's current annualized dividend of $1.16 is up 9.4% from last year. Over the last 5 years, Enterprise Financial Services has increased its dividend 3 times on a year-over-year basis for an average annual increase of 11.56%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Enterprise Financial Services's current payout ratio is 23%, meaning it paid out 23% of its trailing 12-month EPS as dividend.

EFSC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $4.93 per share, with earnings expected to increase 1.02% from the year ago period.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, EFSC is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).