The board of Old National Bancorp (NASDAQ:ONB) has announced that it will pay a dividend on the 16th of December, with investors receiving $0.14 per share. This means that the annual payment will be 2.6% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Old National Bancorp

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 established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 34%, which means that Old National Bancorp would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 39.8% over the next 3 years. Analysts forecast the future payout ratio could be 28% over the same time horizon, which is a number we think the company can maintain.

Old National Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from $0.44 total annually to $0.56. This works out to be a compound annual growth rate (CAGR) of approximately 2.4% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 2.7% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Old National Bancorp could always pay out a higher proportion of earnings to increase shareholder returns.

We Really Like Old National Bancorp's Dividend

Overall, we like to see the dividend staying consistent, and we think Old National Bancorp might even raise payments in the future. 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.

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. For instance, we've picked out 1 warning sign for Old National Bancorp that investors should take into consideration. 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.