Ashmore Group: High Dividend, but Challenging Outlook

The Ashmore Group announces a dividend of £0.121 per share for December 6, which corresponds to an attractive dividend yield of 8.4%. A statistic that initially appears positive and is likely to enhance returns for investors. However, there are legitimate doubts about the sustainability of these distributions. The last payout already showed that the profits achieved were not sufficient to cover obligations to shareholders. Without increasing profits and cash flows, it could be difficult for the company to maintain the dividend at this level. With a projected decline in earnings per share (EPS) of 22.6% next year, the payout ratio could rise to an alarming 155%—a figure that hardly seems sustainable in the long term. Since 2014, dividend payments have remained remarkably stable, increasing annually from a total of £0.162 to £0.169, which represents a minimal annual growth of less than 1%. While this continuity is remarkable, the growth remains modest. However, appearances are deceiving: Over the past five years, EPS has fallen by an average of 12% per year. A decline that could put even conservative payout ratios under pressure. In summary, doubts remain as to whether the Ashmore Group can sustain its dividend payments, even though there have been hardly any cuts in the past. In light of these uncertainties, it might be advisable to look for other income investments. Privately managed companies with stable foundations are more likely to attract investors than those with unpredictable dividend strategies.