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Associated Banc-Corp (NYSE:ASB) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of September to $0.21. This makes the dividend yield 4.4%, which is above the industry average.
See our latest analysis for Associated Banc-Corp
Associated Banc-Corp's Dividend Forecasted To Be Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
Having distributed dividends for at least 10 years, Associated Banc-Corp has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Associated Banc-Corp's payout ratio sits at 16%, an extremely comfortable number that shows that it can pay its dividend.
EPS is set to fall by 20.7% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 44% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.
Associated Banc-Corp Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $0.20 total annually to $0.84. This means that it has been growing its distributions at 15% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Has Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Associated Banc-Corp has grown earnings per share at 9.2% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Associated Banc-Corp Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Associated Banc-Corp that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.