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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 the annual payment will be 2.4% of the current stock price, which is lower than the industry average.
View our latest analysis for Old National Bancorp
Old National Bancorp's Dividend Forecasted To Be Well Covered By Earnings
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 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 34%, which means that Old National Bancorp would be able to pay its last dividend without pressure on the balance sheet.
Over the next 3 years, EPS is forecast to expand by 62.7%. Analysts estimate the future payout ratio will be 25% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
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 $0.44 in 2014, and the most recent fiscal year payment was $0.56. This means that it has been growing its distributions at 2.4% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend's Growth Prospects Are Limited
The company's investors will be pleased to have been receiving dividend income for some time. However, Old National Bancorp's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While growth may be thin on the ground, Old National Bancorp could always pay out a higher proportion of earnings to increase shareholder returns.
An additional note is that the company has been raising capital by issuing stock equal to 16% 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.
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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.