Down 32%, this FTSE stock now has a 12% dividend yield!
One example of this could potentially be Ashmore Group (LSE:ASHM). The UK-based asset manager has had a bit of a rough ride lately, with its market-cap shrinking by almost a third in the last six months. But with dividends still flowing into shareholders' pockets, the yield now sits at a whopping 12% – the fourth largest in the entire FTSE 350.
So is this a buying opportunity or a yield trap? Let's take a closer look.
Ashmore shares have been on a downward trajectory since the 2020 pandemic. There are a variety of factors at play here. However, the prime catalyst behind this trend is the group's exposure to emerging markets.
With all the geopolitical turmoil plaguing the world right now, including trade wars and military conflicts, investor appetite towards emerging economies has been pretty weak. At the same time, while the US dollar has recently weakened, its previously stronger position made investing in these countries less desirable.
For Ashmore, these macroeconomic factors have created quite a few headaches. And it's culminated in a consistent stream of client fund outflows dragging the assets under management all the way, from $91.8bn in June 2019 to $46.2bn in March.
Fiscal Year Ending June
Net Outflows
Driver
2020
$0.1bn
Rising Covid-19 concerns.
2021
$1.2bn
Continued Covid-19-related volatility in emerging markets driving up investment risk.
2022
$13.5bn
A surge in outflows following the Russian invasion of Ukraine.
2023
$11.5bn
Continued rise of geopolitical tensions in Ukraine and the Middle East.
2024
$8.5bn
Persistent risk aversion to emerging markets due to ongoing conflicts.
So far in 2025, the net outflow story of client funds hasn't really changed. The group's latest trading update revealed that a further $3.9bn walked out the door in the three months leading to March.
However, while this does look bleak, its leadership remains optimistic. With US interest rate cuts steadily emerging, investor appetite for riskier emerging market investments is expected to improve. We've actually already started seeing some early signs of this, with net outflows decreasing since 2022 and the MSCI Emerging Market index rebounding in 2024.
As such, despite the pressure on profits, dividends are still being paid. Is this sustainable? In the short term, Ashmore appears to have the financial flexibility to keep up with payouts. But over the medium to long term a restoration of assets under management will be crucial to avoid a dividend cut. And whether that happens ultimately depends on investor sentiment on emerging market investments, which is almost entirely out of management's control.
Personally, I don't like investing in businesses that aren't in control of their own destiny. If everything works out, Ashmore could be a lucrative source of passive income. But even with a 12% dividend yield, the risk's simply too high right now, in my opinion. As such, it's staying on my watchlist until more recovery progress has been made.
The post Down 32%, this FTSE stock now has a 12% dividend yield! appeared first on The Motley Fool UK.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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