Ashmore Group (LON:ASHM) Has Affirmed Its Dividend Of £0.121

Ashmore Group PLC's (LON:ASHM) investors are due to receive a payment of £0.121 per share on 9th of December. The dividend yield will be 8.0% based on this payment which is still above the industry average.

See our latest analysis for Ashmore Group

Ashmore Group's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Ashmore Group's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to grow by 43.6% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 88% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Ashmore Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the annual payment back then was £0.145, compared to the most recent full-year payment of £0.169. This implies that the company grew its distributions at a yearly rate of about 1.5% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Ashmore Group's EPS has declined at around 12% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Ashmore Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Ashmore Group's payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for Ashmore Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.