Associated Banc-Corp's (NYSE:ASB) Shareholders Will Receive A Bigger Dividend Than Last Year

By
Simply Wall St
Published
October 29, 2021
NYSE:ASB
Source: Shutterstock

Associated Banc-Corp (NYSE:ASB) has announced that it will be increasing its dividend on the 15th of December to US$0.20. This will take the dividend yield to an attractive 3.4%, providing a nice boost to shareholder returns.

Check out our latest analysis for Associated Banc-Corp

Associated Banc-Corp's Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Associated Banc-Corp's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 17.9% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 48%, which is comfortable for the company to continue in the future.

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NYSE:ASB Historic Dividend October 30th 2021

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. The first annual payment during the last 10 years was US$0.04 in 2011, and the most recent fiscal year payment was US$0.80. This implies that the company grew its distributions at a yearly rate of about 35% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Associated Banc-Corp has seen EPS rising for the last five years, at 13% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Associated Banc-Corp's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Associated Banc-Corp that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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