Ashmore Group Plc's (LON:ASHM) investors are due to receive a payment of £0.048 per share on 2nd of April. This means the annual payment is 7.7% of the current stock price, which is above the average for the industry.
View our latest analysis for Ashmore Group
Ashmore Group Doesn't Earn Enough To Cover Its Payments
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
EPS is set to fall by 9.8% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 126%, which is definitely a bit high to be sustainable going forward.
Ashmore Group Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was £0.161 in 2014, and the most recent fiscal year payment was £0.169. Dividend payments have been growing, but very slowly over the period. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Dividend Growth May Be Hard To Come By
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. In the last five years, Ashmore Group's earnings per share has shrunk at approximately 7.0% per annum. 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.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Ashmore Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your 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.
About LSE:ASHM
Flawless balance sheet with proven track record and pays a dividend.
