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The board of Ashmore Group Plc (LON:ASHM) has announced that it will pay a dividend of £0.121 per share on the 8th of December. The dividend yield will be 8.8% based on this payment which is still above the industry average.
Check out our latest analysis for Ashmore Group
Ashmore Group Doesn't Earn Enough To Cover Its Payments
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
The next 12 months is set to see EPS grow by 6.6%. If the dividend continues on its recent course, the payout ratio in 12 months could be 127%, which is a bit high and could start applying pressure to the balance sheet.
Ashmore Group Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of £0.151 in 2013 to the most recent total annual payment of £0.169. This works out to be a compound annual growth rate (CAGR) of approximately 1.1% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
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. Earnings per share has been sinking by 11% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
Ashmore Group's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Ashmore Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.