In This Article:
The board of Old National Bancorp (NASDAQ:ONB) has announced that it will pay a dividend of $0.14 per share on the 15th of September. Based on this payment, the dividend yield will be 3.1%, which is fairly typical for the industry.
See our latest analysis for Old National Bancorp
Old National Bancorp's Payment Expected To Have Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much.
Having distributed dividends for at least 10 years, Old National Bancorp has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 57%, which means that Old National Bancorp would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, earnings per share is forecast to rise by 57.3% over the next year. If the dividend continues on this path, the future payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.
Old National Bancorp Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.28 in 2012, and the most recent fiscal year payment was $0.56. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth May Be Hard To Come By
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Old National Bancorp's EPS has declined at around 7.6% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.
An additional note is that the company has been raising capital by issuing stock equal to 77% 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.
In Summary
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.