Old Second Bancorp (NASDAQ:OSBC) Is Paying Out A Dividend Of $0.05
Old Second Bancorp, Inc.'s (NASDAQ:OSBC) investors are due to receive a payment of $0.05 per share on 6th of November. Including this payment, the dividend yield on the stock will be 1.5%, which is a modest boost for shareholders' returns.
See our latest analysis for Old Second Bancorp
Old Second 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.
Old Second Bancorp has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. Using data from its latest earnings report, Old Second Bancorp's payout ratio sits at 9.2%, an extremely comfortable number that shows that it can pay its dividend.
EPS is set to fall by 17.3% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 11% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.
Old Second Bancorp Doesn't Have A Long Payment History
It is great to see that Old Second Bancorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 7 years was $0.04 in 2016, and the most recent fiscal year payment was $0.20. This means that it has been growing its distributions at 26% 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
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Old Second Bancorp has grown earnings per share at 23% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
We Really Like Old Second Bancorp's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Old Second Bancorp that you should be aware of before investing. Is Old Second Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
