Key Highlights

  • OSB Group PLC (LSE:OSB) offers a Dividend Yield of 7.04%.
  • The Interim Dividend for 2026 increased 5% to 11.8 pence, in line with guidance for 5% annual dividend growth.
  • The 2025 total dividend rose 5.1% to 35.3 pence, and a £100 million share buyback is running until March 2027.
  • Net interest Margin guidance for 2026 was trimmed to 215 to 220 basis points due to higher retail funding costs.

A Leading Specialist Lender

OSB Group PLC (LSE:OSB) is a FTSE 250 specialist lender and retail savings group, best known for its Kent Reliance and Precise brands. The group focuses on professional landlords, buy-to-let lending and other specialist Mortgage segments, funding much of its lending through retail deposits.

The shares carry a dividend yield of 7.04%, high for a UK bank. That figure reflects a combination of a progressive dividend, steady Capital generation and a share price that trades at a modest multiple of earnings.

Dividend Growth Track Record

OSB has built a reliable pattern of dividend increases. For 2025, the board proposed a final dividend of 24.1 pence per share, up 5.2% from 22.9 pence, bringing the full-year total to 35.3 pence, an increase of 5.1% on 33.6 pence for 2024. The final was paid on 13 May 2026.

The group's policy sets the interim dividend at one-third of the prior year's total. In August 2026, the board declared an interim of 11.8 pence per share, up from 11.2 pence, payable on 18 September 2026. Management has guided to Dividend per share growth of 5% in 2026, and the interim is consistent with that path.

Profitability and Payout Cover

Earnings comfortably support the payout. OSB reported 2025 profit before tax of £382.5 million and a return on tangible Equity of 13.7%, with tangible net asset value rising to £5.79 per share. Net loans grew 3.2% and the net interest margin reached 228 basis points.

In the first half of 2026, profit before tax was £187.2 million compared with £192.3 million a year earlier. Return on Equity remained in the low teens, which is the range the group targets. With a dividend per share around 35 to 37 pence and Earnings substantially higher, the dividend is well covered.

Capital Returns Beyond Dividends

Shareholder returns extend beyond the dividend. Alongside full-year results in March 2026, OSB launched a new share buyback of up to £100 million. By 4 August 2026, around £69.5 million had been repurchased, and the programme is scheduled to complete by 6 March 2027. Over the 18 months to mid-2026, total capital returned to shareholders reached £360 million. Buybacks reduce the share count, which supports dividend per share growth. With fewer shares in issue, the same total Cash Dividend translates into a higher payment per share, so the buyback and the progressive dividend policy reinforce each other. The combination also signals that management views the shares as attractively priced relative to tangible net asset value, and that surplus capital exists above regulatory requirements.

Margin Pressure and Funding Costs

The main headwind is margin compression. OSB lowered its 2026 net interest margin guidance from about 225 basis points to a range of 215 to 220 basis points, assuming retail funding costs remain elevated. Competition for savings deposits has kept funding expensive even as mortgage pricing has become more competitive. The group is also diversifying its Loan book, with buy-to-let expected to fall to 60% or less of net loans over time.

Leadership Transition

Leadership changed during the year. Chief executive Andy Golding stepped down on 31 August 2026 after a long tenure, and Enrique Alvarez Labiano took over as group chief executive from 1 September 2026. The board has indicated continuity in strategy, including the capital return framework, but investors will monitor whether the new Leadership refines growth or distribution priorities.

Key Risks

Risks include further margin pressure, an increase in arrears if the UK economy weakens, regulatory capital changes and house price movements that affect landlord borrowers. Specialist lenders can also be sensitive to shifts in buy-to-let taxation and regulation. On the positive side, Demand from professional landlords for refinancing remains steady, and the group's broker relationships and product range give it scope to reprice loans as funding costs settle.

Is the Dividend Sustainable?

The dividend at OSB Group PLC (LSE:OSB) appears sustainable. Earnings cover the payout several times over, capital generation funds both dividends and buybacks, and the board has a clear 5% growth guidance for 2026. Margin pressure is the main area to watch, but it affects the pace of growth rather than the safety of the core payout. The 7.04% yield is backed by profit, capital and a disciplined policy.