Old National Bancorp (NASDAQ:ONB) Is Paying Out A Dividend Of $0.14

Old National Bancorp (NASDAQ:ONB) has announced that it will pay a dividend of $0.14 per share on the 15th of September. This means that the annual payment will be 3.1% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Old National Bancorp

Old National Bancorp's Earnings Will Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Old National Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Old National Bancorp's last earnings report, the payout ratio is at a decent 57%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to rise by 57.3% over the next year. If the dividend continues on this path, the future payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.

Old National Bancorp Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.28 in 2012 to the most recent total annual payment of $0.56. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Old National Bancorp has seen earnings per share falling at 7.6% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

We should note that Old National Bancorp has issued stock equal to 77% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

In Summary

Overall, we think Old National Bancorp is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Old National Bancorp (of which 1 is significant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.