Associated Banc-Corp (NYSE:ASB) Is Increasing Its Dividend To $0.24

Associated Banc-Corp (NYSE:ASB) will increase its dividend from last year's comparable payment on the 15th of December to $0.24. This will take the dividend yield to an attractive 3.9%, providing a nice boost to shareholder returns.

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Associated Banc-Corp's Payment Expected To Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Associated Banc-Corp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Associated Banc-Corp's last earnings report, the payout ratio is at a decent 92%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 117.2% over the next 3 years. Despite the current payout ratio being slightly elevated, analysts estimate the future payout ratio will be 32% over the same time period, which would make us comfortable with the sustainability of the dividend.

View our latest analysis for Associated Banc-Corp

Associated Banc-Corp 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. Since 2015, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.96. This means that it has been growing its distributions at 9.1% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Earnings per share has been sinking by 12% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Associated Banc-Corp's payments are rock solid. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Associated Banc-Corp that investors should know about before committing capital to this stock. Is Associated Banc-Corp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.