Old Second Bancorp (NASDAQ:OSBC) Has Announced A Dividend Of $0.06

Old Second Bancorp, Inc.'s (NASDAQ:OSBC) investors are due to receive a payment of $0.06 per share on 10th of February. This payment means the dividend yield will be 1.3%, which is below the average for the industry.

See our latest analysis for Old Second Bancorp

Old Second Bancorp's Earnings Will Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Old Second Bancorp has a good history of paying out dividends, with its current track record at 9 years. While past data isn't a guarantee for the future, Old Second Bancorp's latest earnings report puts its payout ratio at 11%, showing that the company can pay out its dividends comfortably.

Over the next 3 years, EPS is forecast to fall by 4.0%. Fortunately, analysts forecast the future payout ratio to be 14% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Old Second Bancorp Doesn't Have A Long Payment History

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. Since 2016, the annual payment back then was $0.04, compared to the most recent full-year payment of $0.24. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Old Second Bancorp has been growing its earnings per share at 7.6% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Old Second Bancorp's Dividend

Overall, we think Old Second Bancorp is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Old Second Bancorp (of which 1 is a bit concerning!) you should know about. 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.