With a 10.1% dividend yield, could this FTSE 250 share be an income gold mine?
Despite being known largely for its growth opportunities, the FTSE 250‘s still home to some pretty exceptional dividend yields. And right now, one of the highest-yielding stocks investors can buy is Ashmore Group (LSE:ASHM) with a 10.1% payout.
To put this into perspective, that’s more than the average total return the UK stock market has produced since the 1990s. And at this rate, investing £500 a month will push a brand-new portfolio into seven-figure territory in just under 30 years.
So does that make Ashmore a screaming buy right now? Let’s take a closer look.
Investigating the yield
As a quick reminder, Ashmore’s an investment management group specialising in emerging markets with around $46bn of assets under its umbrella. The stock hasn’t received a lot of love lately. With emerging markets hit hard during the pandemic, many economies are still suffering from lingering effects as well as post-Covid inflation. And for Ashmore, that’s resulted in a lot of client funds being withdrawn alongside poor investment returns.
A quick glance at Ashmore’s share price makes the impact of this perfectly clear. Over the last five years, the stock has seen close to 60% of its market capitalisation get wiped out. Yet dividends have continued to flow into the pockets of shareholders, enabling the dividend yield to reach double-digit territory.
Possibility for a rebound?
The global macroeconomic landscape continues to be problematic for many emerging countries. However, with the US dollar being weakened, this has actually created a bit of tailwind for many of these nations. Why? Because a weaker dollar reduces importing costs, borrowing costs, and imported inflation.
Subsequently, the performance of emerging market stocks in 2025 has been quite impressive, rising by around 22% since April when looking at the MSCI Emerging Market index. And as investor sentiment improves in this space, Ashmore’s ability to attract and retain fresh client funds increases, creating new opportunities to charge its service fees.
Sadly, there’s no guarantee as to when investor sentiment will shift. Escalating geopolitical tensions and military conflicts don’t exactly make riskier investments, like emerging market stocks, enticing. And while Ashmore’s balance sheet is well-capitalised with ample liquidity, a persistently low amount of assets under management makes the dividend look less and less sustainable in the long run.
In other words, if things don’t improve, today’s juicy 10% dividend yield could end up getting slashed.
The bottom line
There’s no denying that a cloud of uncertainty is currently hanging over Ashmore’s head right now. And with most of the problems external in nature, there’s not much management can do to rectify the situation beyond making smart investment decisions and encouraging customers to hold through the storm.
But in exchange for taking on this risk, investors are presented with a fairly unique opportunity to potentially lock in a double-digit dividend yield and a price that could climb if investor sentiment improves. It’s a high-risk, high-reward situation. Yet with some early signs of stability in its client funds starting to emerge, it might be an opportunity worth exploring further for investors with a higher risk tolerance.
The post With a 10.1% dividend yield, could this FTSE 250 share be an income gold mine? 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.
