Is Buying Old National Bancorp (NASDAQ:ONB) For Its Upcoming US$0.13 Dividend A Good Choice?
Attention dividend hunters! Old National Bancorp (NASDAQ:ONB) will be distributing its dividend of US$0.13 per share on the 18 September 2018, and will start trading ex-dividend in 2 days time on the 31 August 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Old National Bancorp’s latest financial data to analyse its dividend characteristics.
Check out our latest analysis for Old National Bancorp
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it the top 25% annual dividend yield payer?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share amount increased over the past?
Is its earnings sufficient to payout dividend at the current rate?
Will it have the ability to keep paying its dividends going forward?
How does Old National Bancorp fare?
Old National Bancorp has a trailing twelve-month payout ratio of 67.4%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect ONB’s payout to fall to 38.9% of its earnings, which leads to a dividend yield of around 2.8%. However, EPS should increase to $1.34, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Dividend payments from Old National Bancorp have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Relative to peers, Old National Bancorp generates a yield of 2.6%, which is on the low-side for Banks stocks.
Next Steps:
Whilst there are few things you may like about Old National Bancorp from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three relevant factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for ONB’s future growth? Take a look at our free research report of analyst consensus for ONB’s outlook.
Valuation: What is ONB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ONB is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
