If you are interested in cashing in on OneSavings Bank Plc’s (LON:OSB) upcoming dividend of UK£0.043 per share, you only have 4 days left to buy the shares before its ex-dividend date, 11 October 2018, in time for dividends payable on the 02 November 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding OneSavings Bank can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.

View our latest analysis for OneSavings Bank

How I analyze a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is their annual yield among the top 25% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has the amount of dividend per share grown over the past?

• Does earnings amply cover its dividend payments?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

How well does OneSavings Bank fit our criteria?

The company currently pays out 25% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect OSB’s payout to increase to 29% of its earnings, which leads to a dividend yield of around 4.3%. Moreover, EPS should increase to £0.55. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider OneSavings Bank as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Compared to its peers, OneSavings Bank produces a yield of 3.5%, which is on the low-side for Mortgage stocks.

Next Steps:

Taking all the above into account, OneSavings Bank is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three fundamental aspects you should further examine: