Old Second Bancorp (NASDAQ:OSBC) Has Announced A Dividend Of $0.05

The board of Old Second Bancorp, Inc. (NASDAQ:OSBC) has announced that it will pay a dividend of $0.05 per share on the 8th of May. Including this payment, the dividend yield on the stock will be 1.5%, which is a modest boost for shareholders' returns.

View our latest analysis for Old Second Bancorp

Old Second Bancorp's Dividend Forecasted To Be Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end.

Old Second Bancorp has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 11% also shows that Old Second Bancorp is able to comfortably pay dividends.

Looking forward, earnings per share is forecast to fall by 1.8% over the next year. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 15%, which would be comfortable for the company to continue in the future.

Old Second Bancorp Doesn't Have A Long Payment History

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 implies that the company grew its distributions at a yearly rate of about 26% over that duration. 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

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Old Second Bancorp has been growing its earnings per share at 21% a 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.

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 earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 5 analysts we track are forecasting for Old Second Bancorp for free with public analyst estimates for the company. Is Old Second Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.