Origin Bancorp, Inc. (NASDAQ:OBNK) has announced that it will pay a dividend of $0.15 per share on the 31st of May. This payment means the dividend yield will be 2.0%, 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

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having paid out dividends for 5 years, Origin Bancorp has a good history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Origin Bancorp's payout ratio sits at 19%, an extremely comfortable number that shows that it can pay its dividend.

The next year is set to see EPS grow by 3.2%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 25% by next year, which is in a pretty sustainable range.

Origin Bancorp Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2018, the annual payment back then was $0.13, compared to the most recent full-year payment of $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. We are encouraged to see that Origin Bancorp has grown earnings per share at 30% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

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. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Origin Bancorp Looks Like A Great Dividend Stock

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. 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.