The board of Old Second Bancorp, Inc. (NASDAQ:OSBC) has announced that it will pay a dividend of $0.05 per share on the 5th of August. The dividend yield is 1.2% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Old Second Bancorp

Old Second 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.

Old Second Bancorp has a good history of paying out dividends, with its current track record at 8 years. While past records don't necessarily translate into future results, the company's payout ratio of 10% also shows that Old Second Bancorp is able to comfortably pay dividends.

Looking forward, earnings per share is forecast to fall by 2.8% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 14%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Old Second Bancorp Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 8 years was $0.04 in 2016, and the most recent fiscal year payment was $0.20. This means that it has been growing its distributions at 22% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

We Could See Old Second Bancorp's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. Old Second Bancorp has seen EPS rising for the last five years, at 9.6% per annum. Old Second Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Old Second Bancorp Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.