The Dividend Resilience of Associated Banc-Corp in a Low-Yield World

In an era where the S&P 500's average dividend yield languishes at 1.57% and bond yields remain stubbornly low, income-focused investors are increasingly turning to the relative safety of dividend-paying equities. Among the regional banks, Associated Banc-Corp (ASB) has emerged as a standout, offering a 3.64% dividend yield that outpaces both its peers and the broader market. But is this yield sustainable? And does it reflect a company poised to reward long-term investors in a world where capital preservation and consistent returns are paramount?

A 51-Year Legacy of Dividend Stability

Associated Banc-Corp has paid dividends for 51 consecutive years, a testament to its operational discipline and commitment to shareholder returns. In 2025, the company has maintained a quarterly payout of $0.23 per share, with a trailing twelve-month dividend of $0.92. This consistency is particularly notable given the economic turbulence of the past year, including a $164 million net loss in Q4 2024. Yet, ASB not only retained its dividend but also signaled confidence in its ability to grow it.

The key to this resilience lies in ASB's payout ratio, which stands at 38.33% for Q1 2025. This ratio, calculated using basic earnings per share (EPS) of $0.60, has historically ranged between 29.33% and 42.31%, suggesting a balanced approach to capital allocation. By distributing a portion of its earnings while retaining enough for reinvestment, ASB avoids the pitfalls of overcommitment, ensuring it can navigate downturns without sacrificing shareholder returns.

Financial Health as a Foundation for Dividend Resilience

ASB's ability to sustain its dividend is underpinned by a robust capital structure. The company's CET1 capital ratio of 10.11% (as of Q1 2025) exceeds regulatory requirements and provides a buffer against economic shocks. This strength is critical in a low-yield environment, where investors demand assurance that companies can withstand stress without cutting dividends.

Moreover, ASB's earnings trajectory has shown signs of stabilization. After a Q4 2024 loss, the company's Q1 2025 EPS rebounded to $0.60, driven by a 7-basis-point increase in net interest margins and disciplined expense management. Total period-end loans grew to $30.6 billion in Q2 2025, with commercial and industrial (C&I) lending expanding by $1.3 billion year-over-year. These metrics highlight ASB's ability to generate consistent cash flows, a prerequisite for dividend sustainability.

Geographic Diversification as a Competitive Edge

ASB's regional focus on Illinois, Minnesota, and Wisconsin offers a dual advantage. First, its 200 banking locations provide a stable, localized customer base less susceptible to national economic swings. Second, the Midwest's relatively resilient labor markets and diversified industries—ranging from manufacturing to agriculture—offer a buffer against sector-specific downturns. This regional concentration, while a potential risk in a national recession, has historically allowed ASB to outperform peers during periods of regional stability.

Deposit growth further reinforces this stability. ASB's total period-end deposits reached $34.1 billion in Q2 2025, with noninterest-bearing deposits rebounding to 19% of the total. This sticky funding source reduces reliance on volatile wholesale markets and lowers the cost of capital, enabling the company to maintain healthy net interest margins even in a low-rate environment.

Peer Comparison: A Premium for Stability

ASB's 3.64% yield stands out against the 3.13% average for Midwest banks and the S&P 500's 1.57%. This premium reflects not only the company's strong yield but also its reliability. Over the past five years, ASB has increased its dividend at an average annual rate of 5.65%, outpacing the 3.2% growth of the S&P 500. Analysts attribute this to ASB's disciplined approach to credit risk, with nonaccrual loans at 0.44% of total loans—a stark contrast to the industry average of 0.65%.

Risks in a Low-Yield World

No investment is without risk. ASB's reliance on net interest income makes it vulnerable to interest rate volatility. A prolonged period of elevated rates could pressure loan demand and compress margins, particularly in its C&I segment. Additionally, the company's perpetual preferred stock dividends—$0.3671875 for Series E and $0.3515625 for Series F—tie up capital that could otherwise be allocated to common shareholders during lean periods.

Furthermore, ASB's regional concentration exposes it to localized economic downturns. While the Midwest has shown resilience, a sector-specific crisis—such as a collapse in agricultural commodity prices—could strain its loan portfolio. Investors must weigh these risks against the company's strong capital position and proactive risk management.

The Verdict for Income Investors

For income-focused investors, ASB presents a compelling case. Its 3.64% yield, coupled with a sustainable payout ratio and robust capital ratios, offers a rare combination of income and security in a low-yield world. The company's strategic focus on high-yielding commercial lending and its disciplined approach to credit risk further enhance its appeal.

However, investors should monitor macroeconomic conditions and the Federal Reserve's rate trajectory. A scenario of prolonged high rates or a regional downturn could test ASB's resilience. For now, though, the company's 51-year dividend streak and forward-looking guidance—projecting 14–15% net interest income growth in 2025—suggest it remains well-positioned to deliver.

In a market starved for yield, Associated Banc-Corp is not just a safe harbor—it's a lighthouse. For those willing to hold, the dividends keep coming.