Old Second Bancorp (NASDAQ:OSBC) Is Paying Out A Dividend Of $0.05
The board of Old Second Bancorp, Inc. (NASDAQ:OSBC) has announced that it will pay a dividend on the 7th of August, with investors receiving $0.05 per share. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.
See our latest analysis for Old Second Bancorp
Old Second Bancorp's Dividend Forecasted To Be Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.
Having paid out dividends for 7 years, Old Second Bancorp has a good history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 9.7% also shows that Old Second Bancorp is able to comfortably pay dividends.
Over the next year, EPS is forecast to fall by 6.0%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 14%, which we are pretty comfortable with and we think would be feasible on an earnings basis.
Old Second Bancorp Is Still Building Its Track Record
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. The annual payment during the last 7 years was $0.04 in 2016, and the most recent fiscal year payment was $0.20. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year 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 who have held shares in the company for the past few years will be happy with the dividend income they have received. Old Second Bancorp has seen EPS rising for the last five years, at 24% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Old Second Bancorp Looks Like A Great Dividend Stock
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. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Old Second Bancorp that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
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