Old National Bancorp (NASDAQ:ONB) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 30th of August, you won’t be eligible to receive this dividend, when it is paid on the 17th of September.
Old National Bancorp’s next dividend payment will be US$0.13 per share, on the back of last year when the company paid a total of US$0.52 to shareholders. Looking at the last 12 months of distributions, Old National Bancorp has a trailing yield of approximately 3.2% on its current stock price of $16.42. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it’s growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Old National Bancorp paid out a comfortable 40% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we’re encouraged by the steady growth at Old National Bancorp, with earnings per share up 5.5% on average over the last five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Old National Bancorp has seen its dividend decline 5.5% per annum on average over the past 10 years, which is not great to see. It’s unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We’d hope it’s because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Has Old National Bancorp got what it takes to maintain its dividend payments? Old National Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating Old National Bancorp more closely.
Curious what other investors think of Old National Bancorp? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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