Why It Might Not Make Sense To Buy Associated Banc-Corp (NYSE:ASB) For Its Upcoming Dividend

Yahoo

29-05-2025

Associated Banc-Corp (NYSE:ASB) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Associated Banc-Corp's shares before the 2nd of June to receive the dividend, which will be paid on the 16th of June.
The company's next dividend payment will be US$0.23 per share, on the back of last year when the company paid a total of US$0.92 to shareholders. Based on the last year's worth of payments, Associated Banc-Corp stock has a trailing yield of around 4.0% on the current share price of US$23.12. If you buy this business for its dividend, you should have an idea of whether Associated Banc-Corp's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Associated Banc-Corp paid out 107% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
Check out our latest analysis for Associated Banc-Corp
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Associated Banc-Corp's earnings per share have dropped 16% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
We'd also point out that Associated Banc-Corp issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Associated Banc-Corp has delivered an average of 9.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Associated Banc-Corp is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
Has Associated Banc-Corp got what it takes to maintain its dividend payments? Earnings per share are in decline and Associated Banc-Corp is paying out what we feel is an uncomfortably high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Associated Banc-Corp. In terms of investment risks, we've identified 1 warning sign with Associated Banc-Corp and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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