Origin Bancorp, Inc. (NASDAQ:OBNK) has announced that it will be increasing its dividend on the 31st of August to US$0.13. Even though the dividend went up, the yield is still quite low at only 1.1%.
Origin Bancorp's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Origin Bancorp was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 3.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which is in the range that makes us comfortable with the sustainability of the dividend.
Origin Bancorp Doesn't Have A Long Payment History
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The first annual payment during the last 3 years was US$0.13 in 2018, and the most recent fiscal year payment was US$0.52. This works out to be a compound annual growth rate (CAGR) of approximately 59% a year over that time. Origin Bancorp has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
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 Origin Bancorp has grown earnings per share at 51% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
Origin Bancorp Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Origin Bancorp is a strong income stock thanks to its track record and growing earnings. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Origin Bancorp that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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