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 6th of November. This means the annual payment will be 1.5% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Old Second Bancorp

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

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. Using data from its latest earnings report, Old Second Bancorp's payout ratio sits at 9.2%, an extremely comfortable number that shows that it can pay its dividend.

Over the next 3 years, EPS is forecast to fall by 17.3%. Despite that, analysts estimate the future payout ratio could be 11% over the same time period, which is in a pretty comfortable range.

Old Second Bancorp Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the annual payment back then was $0.04, compared to the most recent full-year payment of $0.20. This means that it has been growing its distributions at 26% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Old Second Bancorp has impressed us by growing EPS at 23% per 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

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. 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 of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.