Associated Banc-Corp (NYSE:ASB) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of December to $0.23. This takes the annual payment to 3.5% of the current stock price, which is about average for the industry.

Associated Banc-Corp's Earnings Will Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time.

Associated Banc-Corp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Associated Banc-Corp's last earnings report, the payout ratio is at a decent 73%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 72.8%. Analysts forecast the future payout ratio could be 37% over the same time horizon, which is a number we think the company can maintain.

Associated Banc-Corp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.36 in 2014, and the most recent fiscal year payment was $0.92. This means that it has been growing its distributions at 9.8% 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 May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Associated Banc-Corp has seen earnings per share falling at 9.5% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Associated Banc-Corp's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.