Origin Bancorp, Inc. (NASDAQ:OBNK) stock is about to trade ex-dividend in 4 days time. Investors can purchase shares before the 15th of August in order to be eligible for this dividend, which will be paid on the 30th of August.
Origin Bancorp's upcoming dividend is US$0.092 a share, following on from the last 12 months, when the company distributed a total of US$0.37 per share to shareholders. Based on the last year's worth of payments, Origin Bancorp has a trailing yield of 1.1% on the current stock price of $33. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Origin Bancorp can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Origin Bancorp has a low and conservative payout ratio of just 6.3% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For that reason, it's encouraging to see Origin Bancorp's earnings over the past year have risen 0.3499849053338624. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far.
One year is not very long in the grand scheme of things though, so we wouldn't draw too strong a conclusion based on these results.
Origin Bancorp also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.
Given that Origin Bancorp has only been paying a dividend for a year, there's not much of a past history to draw insight from.
To Sum It Up
Should investors buy Origin Bancorp for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Origin Bancorp more closely.
Wondering what the future holds for Origin Bancorp? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.