Old Second Bancorp (NASDAQ:OSBC) Could Be A Buy For Its Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Old Second Bancorp, Inc. (NASDAQ:OSBC) is about to go ex-dividend in just 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Old Second Bancorp's shares before the 31st of July in order to be eligible for the dividend, which will be paid on the 10th of August.
The company's next dividend payment will be US$0.07 per share, on the back of last year when the company paid a total of US$0.28 to shareholders. Calculating the last year's worth of payments shows that Old Second Bancorp has a trailing yield of 1.2% on the current share price of US$24.03. If you buy this business for its dividend, you should have an idea of whether Old Second Bancorp's dividend is reliable and sustainable. As a result, readers should always check whether Old Second Bancorp has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Old Second Bancorp has a low and conservative payout ratio of just 15% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Check out our latest analysis for Old Second Bancorp
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Old Second Bancorp's earnings per share have risen 14% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Old Second Bancorp has delivered 21% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Is Old Second Bancorp an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating Old Second Bancorp more closely.
So while Old Second Bancorp looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for Old Second Bancorp that you should be aware of before investing in their shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.