The board of Old Second Bancorp, Inc. (NASDAQ:OSBC) has announced that it will pay a dividend of $0.06 per share on the 5th of May. This payment means the dividend yield will be 1.6%, which is below the average for the industry.

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Old Second Bancorp's Payment Expected To Have Solid Earnings Coverage

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 paid out dividends for 9 years, Old Second Bancorp has a good history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Old Second Bancorp's payout ratio sits at 11%, an extremely comfortable number that shows that it can pay its dividend.

The next 3 years are set to see EPS grow by 12.2%. The future payout ratio could be 13% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

View our latest analysis for Old Second Bancorp

Old Second Bancorp Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2016, the dividend has gone from $0.04 total annually to $0.24. This means that it has been growing its distributions at 22% per annum 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.

We Could See Old Second Bancorp's Dividend Growing

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 7.5% 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.

In Summary

Overall, a consistent dividend is a good thing, and we think that Old Second Bancorp has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 Old Second Bancorp analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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