Old Second Bancorp, Inc. (NASDAQ:OSBC) will pay a dividend of $0.06 on the 10th of February. This means the annual payment will be 1.3% of the current stock price, which is lower than the industry average.
See our latest analysis for Old Second Bancorp
If it is predictable over a long period, even low dividend yields can be attractive.
Old Second Bancorp has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. While past records don’t necessarily translate into future results, the company’s payout ratio of 11% also shows that Old Second Bancorp is able to comfortably pay dividends.
Looking forward, earnings per share is forecast to fall by 4.0% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 14% over the same time period, which we think the company can easily maintain.
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 annual payment back then was $0.04, compared to the most recent full-year payment of $0.24. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn’t be inclined to rely on it until a longer track record can be developed.
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 7.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Old Second Bancorp’s prospects of growing its dividend payments in the future.
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. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
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. To that end, Old Second Bancorp has 2 warning signs (and 1 which can’t be ignored) we think 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.
