Ashmore Group PLC (LON:ASHM) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 5th of November to receive the dividend, which will be paid on the 11th of December.

Ashmore Group's next dividend payment will be UK£0.12 per share. Last year, in total, the company distributed UK£0.17 to shareholders. Based on the last year's worth of payments, Ashmore Group stock has a trailing yield of around 4.7% on the current share price of £3.562. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Ashmore Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Ashmore Group paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Ashmore Group earnings per share are up 6.2% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Ashmore Group has increased its dividend at approximately 2.7% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Should investors buy Ashmore Group for the upcoming dividend? Ashmore Group has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. It doesn't appear an outstanding opportunity, but could be worth a closer look.

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. Our analysis shows 1 warning sign for Ashmore Group and you should be aware of this before buying any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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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