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I love a generous dividend and this FTSE 250 stock certainly delivers that. The trailing yield’s a staggering 10.2%, one of the highest on the mid-cap index.
That’s enough to double an investor’s money in less than eight years, even if the shares didn’t rise at all. The company is specialist emerging markets fund manager Ashmore Group (LSE: ASHM), and that’s another reason to be interested.
Ashmore’s a tempting income play
Emerging markets have struggled for 15 years now, and so has Ashmore. Its shares trade at similar levels to a decade ago. An investor who bought five years ago would be nursing a loss of nearly 60%, although dividends have softened the blow. The shares are down 8% in the last year.
Sky-high yields are often a warning sign because they reflect a falling share price, and that’s certainly true here. But here’s the thing. Emerging markets are on the march again. The MSCI Emerging Markets Index is up almost 33% in the year to 31 October. That compares to less than 20% on MSCI World. Could this be the turning point?
Many investors have pinned their hopes on Ashmore’s recover, only to be disappointed. In March, for example, UBS upgraded the stock from Neutral to Buy, citing better fund flows and attractive valuations. The following month, Ashmore reported $3.9bn of quarterly institutional redemptions, and momentum sagged.
Top recovery share?
On 14 October, the group reported a 2% rise in assets under management in its first quarter of 2026, with total assets rising by $1.1bn to $48.7bn. It still suffered £300m of outflows though, offset by a positive investment performance of $1.4bn.
The board nonetheless believes it’s well positioned to benefit from the emerging markets recovery, as investors look beyond the US after a strong run.
Then came the customary knock back. On Tuesday (11 November) Deutsche Bank downgraded Ashmore from Hold to Sell, cutting its price target to 130p from 140p (it stands at 166p today). Deutsche blamed a high valuation relative to its peers and overly optimistic fund flow expectations from analysts.
So how solid is that dividend? Not very. Operating cash flow was £49m last year but funding the dividend cost £120m. Earnings per share were 13.94p in 2024 against a dividend per share of 16.9p, leaving cover thin at 0.82. The board has hiked shareholder payouts just once in the last 10 years. It clearly doesn’t want to cut it, but unless cash flows improve, it may have no choice. That won’t be good for the share price.
Dividend at risk
Consensus one-year share price forecasts produce a median target of around 162p, slightly lower than today. Of nine analysts offering ratings in the last three months, just one says Buy. That’s pretty damning.
Ashmore has massive recovery potential, but I think investors would have to be very brave to consider buying today. I can see far less risky high-yield stocks, particularly on the FTSE 100, and I’d suggest looking at those first.
