Old Second Bancorp's (NASDAQ:OSBC) Dividend Will Be $0.05

Old Second Bancorp, Inc. (NASDAQ:OSBC) will pay a dividend of $0.05 on the 5th of August. The dividend yield is 1.2% based on this payment, which is a little bit low compared to the other companies in 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 established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Old Second Bancorp's latest earnings report puts its payout ratio at 10%, showing that the company can pay out its dividends comfortably.

EPS is set to fall by 2.5% over the next 12 months. 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 Is Still Building Its Track Record

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 implies that the company grew its distributions at a yearly rate of about 22% over that duration. 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 Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Old Second Bancorp has grown earnings per share at 9.6% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Old Second Bancorp's Dividend

Overall, we like to see the dividend staying consistent, and we think Old Second Bancorp might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Old Second Bancorp (of which 1 can't be ignored!) you should know about. 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.

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