The board of Old National Bancorp (NASDAQ:ONB) has announced that it will pay a dividend of $0.14 per share on the 16th of June. This means that the annual payment will be 2.7% of the current stock price, which is in line with the average for the industry.
Old National Bancorp’s Dividend Forecasted To Be Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn’t mean too much.
Old National Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company’s payout ratio shows 32%, which means that Old National Bancorp would be able to pay its last dividend without pressure on the balance sheet.
Over the next 3 years, EPS is forecast to expand by 69.0%. Analysts estimate the future payout ratio will be 21% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for Old National Bancorp
Old National Bancorp Has A Solid Track Record
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 implies that the company grew its distributions at a yearly rate of about 2.4% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Old National Bancorp May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Old National Bancorp has only grown its earnings per share at 4.2% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
An additional note is that the company has been raising capital by issuing stock equal to 16% of shares outstanding in the last 12 months. Regularly doing this can be detrimental – it’s hard to grow dividends per share when new shares are regularly being created.
Old National Bancorp Looks Like A Great Dividend Stock
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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we’ve identified 2 warning signs for Old National Bancorp that you should be aware of before investing. 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.
