Old Second Bancorp (NASDAQ:OSBC) Has Affirmed Its Dividend Of $0.05

Old Second Bancorp, Inc. (NASDAQ:OSBC) has announced that it will pay a dividend of $0.05 per share on the 6th of February. Including this payment, the dividend yield on the stock will be 1.3%, which is a modest boost for shareholders' returns.

See our latest analysis for Old Second Bancorp

Old Second Bancorp's Earnings Will Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Old Second Bancorp has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Old Second Bancorp's latest earnings report puts its payout ratio at 24%, showing that the company can pay out its dividends comfortably.

Over the next 3 years, EPS is forecast to expand by 69.3%. Analysts estimate the future payout ratio will be 11% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Old Second Bancorp Is Still Building Its Track Record

Old Second Bancorp's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.04 in 2016 to the most recent total annual payment of $0.20. This means that it has been growing its distributions at 26% per annum over that time. Old Second Bancorp has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Old Second Bancorp May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately, Old Second Bancorp's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Old Second Bancorp's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Old Second Bancorp that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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