Like Gary said, "outside" could be used instead of "out" however, your sentence is a natural and common one. "out" is an adverb (of place) in your sentence. "out of" is a preposition.

I don't know much grammar, but I think that it is an adverb. It's short for outside - the old man was outside clipping... But it could also be a preposition maybe - outside the house? It's not a good idea to abbreviate words - just because a dictionary does it, doesn't mean that you do it in normal writing.