Ashmore Group (LON:ASHM) Has Re-Affirmed Its Dividend Of UK£0.12

The board of Ashmore Group PLC (LON:ASHM) has announced that it will pay a dividend of UK£0.12 per share on the 10th of December. This means the annual payment is 4.7% of the current stock price, which is above the average for the industry.

View our latest analysis for Ashmore Group

Ashmore Group's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite comfortably covered by Ashmore Group's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Looking forward, earnings per share is forecast to fall by 34.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 71%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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Ashmore Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from UK£0.13 in 2011 to the most recent annual payment of UK£0.17. This works out to be a compound annual growth rate (CAGR) of approximately 2.7% 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.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Ashmore Group has seen EPS rising for the last five years, at 14% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

Overall, a consistent dividend is a good thing, and we think that Ashmore Group has the ability to continue this into the future. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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 curated list of strong dividend payers.

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.

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