Old Second Bancorp's (NASDAQ:OSBC) Dividend Will Be $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 7th of August. Including this payment, the dividend yield on the stock will be 1.3%, which is a modest boost for shareholders' returns.

Check out 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 9.7% also shows that Old Second Bancorp is able to comfortably pay dividends.

Over the next year, EPS is forecast to fall by 6.0%. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 14%, which would be comfortable for the company to continue in the future.

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. The dividend has gone from an annual total of $0.04 in 2016 to the most recent total annual payment of $0.20. This works out to be a compound annual growth rate (CAGR) of approximately 26% 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 could be attracted to the stock based on the quality of its payment history. Old Second Bancorp has impressed us by growing EPS at 24% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Old Second Bancorp's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Old Second Bancorp that investors should take into consideration. 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.