Ashmore Group Plc's (LON:ASHM) investors are due to receive a payment of ￡0.048 per share on 2nd of April. This makes the dividend yield 7.4%, which will augment investor returns quite nicely.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Ashmore Group's stock price has increased by 36% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Ashmore Group

Ashmore Group Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 116% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is set to fall by 10.6% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 128%, which could put the dividend under pressure if earnings don't start to improve.

Ashmore Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ￡0.151, compared to the most recent full-year payment of ￡0.169. This works out to be a compound annual growth rate (CAGR) of approximately 1.1% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. It's not great to see that Ashmore Group's earnings per share has fallen at approximately 7.0% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Ashmore Group's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Ashmore Group's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.