Last update on 2024-06-27

Associated Banc-Corp (ASB) - Dividend Analysis (Final Score: 6/8)

Evaluate the performance and stability of Associated Banc-Corp's (ASB) dividend policy with an in-depth 8-criteria analysis, revealing a final score of 6/8.

Short Analysis - Dividend Score: 6

We're running Associated Banc-Corp (ASB) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield compares annual dividends to the share price, indicating shareholders' return on investment purely from dividends.

Associated Banc-Corp (ASB) has a dividend yield of 3.9738%, significantly higher than the industry average of 2.76%. Over the past 20 years, ASB's dividend yield has fluctuated but generally stayed competitive, peaking during economic downturns such as in 2008 with a yield of 6.0678%. This high dividend yield is certainly attractive to income-focused investors, suggesting that the company is a solid option for those looking to receive regular income from their investment. Furthermore, an increase in the dividend yield, alongside a historically moderate to high yield in recent years, implies that ASB has maintained a robust dividend policy, translating into consistent returns for its shareholders. However, it’s important to note that the dividend yield can be influenced by the stock price as well. Despite occasional dips, the current above-industry-average yield highlights a positive trend for the company's dividend attractiveness.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate (DGR) measures the annualized percentage rate of growth in a company's dividend payouts. Higher rates indicate robust health.

The data for Associated Banc-Corp (ASB) shows inconsistent dividend ratios with extreme fluctuations, including a significant negative spike in 2009 (-62.9921%) and 2010 (-91.4894%). The positive average dividend ratio of 24.3620% is deceptive due to these extremities. Although certain years did witness high dividend ratios, the overall inconsistency and periods of negative growth suggest a volatile dividend growth history. This trend is bad as stability in dividends is crucial for long-term investors.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average Payout Ratio lower than 65% in the last 20 years is a measure to check if the company is retaining enough of its earnings to ensure sustainable growth and reinvestment.

The payout ratio is a useful indicator to assess how much of its earnings a company is paying out as dividends to shareholders. For Associated Banc-Corp (ASB), the average payout ratio over the last 20 years has been approximately -4.4%. This negative value suggests there have been years where the company reported a loss but still paid out dividends. Notably, the payout ratio spiked to extremes in 2009 and 2010 with ratios of -45.57% and -800% respectively, which drastically impacts the average. However, focusing on the trend over the remaining years, it's evident that ASB's payout ratio has generally stayed well below the 65% threshold, with the exception of 2023, where it rose to 69.67%. A consistent low payout ratio indicates that the company retains a higher portion of its earnings, leaving ample room for growth and reinvestment. Given these factors, the trend is largely favorable. Policy revisions might be prudent to avoid sporadic high payout scenarios that can distress financial standing.

Dividends Well Covered by Earnings?

Criterion 2 entails that dividends should be well covered by the earnings, ideally with an acceptable payout ratio that shows sustainability.

Examining Associated Banc-Corp's earnings per share (EPS) and dividends per share (DPS) over the past two decades reveals a steady trend, with some volatility. For the majority of the years, the payout ratio (dividends covered by earnings) stays well below 50%, indicating that the company effectively manages its dividend payments. However, years like 2009 and 2010 show negative earnings, severely impacting the payout ratios. In recent years, particularly from 2019-2023, the payout ratios have slightly increased but still remain under control, suggesting a good balance between dividends paid and earnings retained. The trend of having a ratio between 33%-35% in many of these years reflects a disciplined and sustainable approach toward dividend distribution.

Dividends Well Covered by Cash Flow?

Assessing whether dividends are well covered by cash flow is crucial because it indicates the sustainability of dividend payments. High coverage means the company can easily afford its dividends.

Analyzing the cash flow coverage for Associated Banc-Corp (ASB) from 2003 to 2023 shows varying ratios. In 2009, the coverage spiked to 0.875, suggesting strong cash flow relative to dividend payouts, which is positive. However, in years like 2010 and 2011, the coverage was very low (0.070 and 0.090, respectively), indicating potential challenges in sustaining dividends. In more recent years, the coverage ratios have stabilized but remain moderate, around 0.250 to 0.370. This suggests ongoing but cautious ability to cover dividends through cash flow. A higher coverage ratio is generally preferable as it provides a buffer for dividend sustainability, but ASB's current ratios indicate a relatively balanced yet conservative dividend policy. This trend is moderately good but suggests room for improvement to enhance dividend security.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over a long period signal a company's consistent financial health and commitment to rewarding shareholders.

Analyzing Associated Banc-Corp's dividends over the past 20 years reveals some significant fluctuations, particularly in the period following the 2008 financial crisis. In 2009, the dividend per share dramatically dropped from $1.27 to $0.47, a decrease of over 63%. Moreover, in 2010 and 2011, dividends further shrunk to as low as $0.04 per share. While the company has clearly been making efforts to increase dividends since 2012, with gradual increments leading to a dividend per share of $0.85 in 2023, this history of substantial cuts may concern income-focused investors seeking stability. Therefore, Associated Banc-Corp fails to meet the criterion of stable dividends over the past 20 years.

Dividends Paid for Over 25 Years?

Examining whether a company has paid dividends consistently over the past 25 years, is crucial as it reflects the company’s commitment to returning capital to shareholders and signals financial stability.

Associated Banc-Corp (ASB) has demonstrated a strong commitment to its shareholders by consistently paying dividends for over 25 years. Though there was a significant reduction in dividends per share in 2009 and 2010, likely due to the financial crisis, the company resumed and even increased its dividend payments thereafter. By 2023, dividends per share had risen to 0.85 from a low of 0.04 in 2010, showcasing a positive trend. This consistency and growth in dividend payments is a good indicator of the company’s sustained financial health and shareholder-friendly policies.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to the consistent reduction in the number of shares outstanding, which often indicates that a company is confident in its financial health and aims to return value to its shareholders through stock buybacks.

Analyzing the data for Associated Banc-Corp (ASB) over the past 20 years, it is evident that there have been consistent stock repurchases. The number of shares outstanding shows a significant decrease in several years deemed reliable, particularly over the past decade. For instance, from 2013 to 2022, the company reduced its outstanding shares almost every year, achieving a reduction from 165.8 million shares in 2013 to approximately 149.2 million shares in 2022. This reliable reduction trend can be interpreted as a positive signal. The company appears to strategically execute share buybacks to enhance shareholder value, reflecting sustained confidence in its financial standing and future prospects. These reductions help improve per-share metrics, thus making the stock potentially more attractive to investors.