Origin Bancorp, Inc. (NYSE:OBK) has announced that it will pay a dividend of $0.15 per share on the 31st of August. This payment means the dividend yield will be 1.8%, which is below the average for the industry.
See our latest analysis for Origin Bancorp
Origin Bancorp's Payment Expected To Have Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.
Origin Bancorp has a good history of paying out dividends, with its current track record at 5 years. While past records don't necessarily translate into future results, the company's payout ratio of 20% also shows that Origin Bancorp is able to comfortably pay dividends.
Over the next year, EPS is forecast to fall by 15.3%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 30%, which we are pretty comfortable with and we think would be feasible on an earnings basis.
Origin Bancorp Is Still Building Its Track Record
Origin Bancorp's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 5 years was $0.13 in 2018, and the most recent fiscal year payment was $0.60. This means that it has been growing its distributions at 36% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Origin Bancorp has impressed us by growing EPS at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
An additional note is that the company has been raising capital by issuing stock equal to 30% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
We Really Like Origin Bancorp's Dividend
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.