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Shares of OneSavings Bank Plc (LON:OSB) will begin trading ex-dividend in 3 days. To qualify for the dividend check of UK£0.10 per share, investors must have owned the shares prior to 21 March 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. 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.

Check out our latest analysis for OneSavings Bank

5 questions I ask before picking a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

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

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has dividend per share risen in the past couple of years?

• Does earnings amply cover its dividend payments?

• Will it be able to continue to payout at the current rate in the future?

Does OneSavings Bank pass our checks?

The company currently pays out 26% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 36% which, assuming the share price stays the same, leads to a dividend yield of 4.5%. Furthermore, EPS should increase to £0.57. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. 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.

Relative to peers, OneSavings Bank produces a yield of 3.6%, which is on the low-side for Mortgage stocks.

Next Steps:

If you are building an income portfolio, then OneSavings Bank is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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 relevant aspects you should look at: