Old Second Bancorp (NASDAQ:OSBC) Is Paying Out A Dividend Of $0.05

Old Second Bancorp, Inc. (NASDAQ:OSBC) will pay a dividend of $0.05 on the 6th of May. This payment means the dividend yield will be 1.4%, 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

If it is predictable over a long period, even low dividend yields can be attractive.

Old Second Bancorp has a good history of paying out dividends, with its current track record at 8 years. While past data isn't a guarantee for the future, Old Second Bancorp's latest earnings report puts its payout ratio at 10.0%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS is forecast to fall by 4.2%. But if the dividend continues along recent trends, we estimate the future payout ratio could be 14%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Old Second Bancorp Doesn't Have A Long Payment History

It is great to see that Old Second Bancorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the dividend has gone from $0.04 total annually to $0.20. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Old Second Bancorp has impressed us by growing EPS at 12% per year over the past five years. Old Second Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Old Second Bancorp's Dividend

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 distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Old Second Bancorp that investors should know about before committing capital to this stock. 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.