The board of Old National Bancorp (NASDAQ:ONB) has announced that it will pay a dividend on the 17th of March, with investors receiving $0.14 per share. This means the annual payment will be 2.4% of the current stock price, which is lower than the industry average.
View our latest analysis for Old National Bancorp
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.
Having distributed dividends for at least 10 years, Old National Bancorp has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company’s payout ratio shows 33%, which means that Old National Bancorp would be able to pay its last dividend without pressure on the balance sheet.
The next 3 years are set to see EPS grow by 81.3%. Analysts forecast the future payout ratio could be 19% over the same time horizon, which is a number we think the company can maintain.
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2015, the annual payment back then was $0.44, compared to the most recent full-year payment of $0.56. This means that it has been growing its distributions at 2.4% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. Earnings per share has been crawling upwards at 3.4% per year. While EPS growth is quite low, Old National Bancorp has the option to increase the payout ratio to return more cash to shareholders.
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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 7 Old National Bancorp analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.
