Old National Bancorp (NASDAQ:ONB) will pay a dividend of $0.14 on the 16th of June. The dividend yield is 2.5% based on this payment, which is a little bit low compared to the other companies in the industry.
Old National 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.
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. Based on Old National Bancorp’s last earnings report, the payout ratio is at a decent 32%, meaning that the company is able to pay out its dividend with a bit of room to spare.
The next 3 years are set to see EPS grow by 90.1%. Analysts forecast the future payout ratio could be 21% over the same time horizon, which is a number we think the company can maintain.
Check out our latest analysis for Old National Bancorp
Old National Bancorp Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.44 in 2015, and the most recent fiscal year payment was $0.56. This works out to be a compound annual growth rate (CAGR) of approximately 2.4% a year over that time. Although we can’t deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Old National Bancorp May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 4.2% per annum over the last five years, which admittedly is a bit slow. If Old National Bancorp is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
We should note that Old National Bancorp has issued stock equal to 16% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus – perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
We Really Like Old National Bancorp’s Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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 National Bancorp that investors should know about before committing capital to this stock. Is Old National 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.
