Why You Might Be Interested In Ashmore Group PLC (LON:ASHM) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ashmore Group PLC (LON:ASHM) is about to trade ex-dividend in the next three days. Ex-dividend means that investors that purchase the stock on or after the 4th of March will not receive this dividend, which will be paid on the 30th of March.

Ashmore Group's next dividend payment will be UK£0.048 per share, and in the last 12 months, the company paid a total of UK£0.17 per share. Looking at the last 12 months of distributions, Ashmore Group has a trailing yield of approximately 4.1% on its current stock price of £4.124. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Ashmore Group can afford its dividend, and if the dividend could grow.

See our latest analysis for Ashmore Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Ashmore Group paid out 57% of its earnings to investors last year, a normal payout level for most businesses.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Ashmore Group, with earnings per share up 8.1% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Ashmore Group has delivered an average of 2.7% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Ashmore Group worth buying for its dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. We think there are likely better opportunities out there.

However if you're still interested in Ashmore Group as a potential investment, you should definitely consider some of the risks involved with Ashmore Group. For example, Ashmore Group has 2 warning signs (and 1 which is potentially serious) we think you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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