The FTSE 250 could be a treasure trove for buyers on the lookout for earnings potential. Nevertheless, not each inventory with a excessive dividend yield is price shopping for. So after I noticed a share with a double-digit share yield however a falling share price, I knew I needed to do some extra digging. Right here’s what I came upon.

Falling income, rising yield

I’m referring to Ashmore Group (LSE:ASHM). The specialist funding administration agency at present has a dividend yield of 11%, making it one of many highest-yielding choices in your complete index.

Earlier than I can work out if the inventory is a cut price, I would like to know why it has dropped by 30% over the previous yr. A part of the issue has been declining property underneath administration (AuM). For monetary service suppliers, this metric is absolutely essential. It refers to how a lot in shopper funds it manages at any time limit. Because it makes cash from charging charges and commissions from managing the cash, it’s straight correlated to general profitability.

For Ashmore, the newest half-year outcomes out in February confirmed AuM falling from £39.44bn from June 2024 to £39.04bn now. This issue pulled income down from £94.5m to £81m.

One other issue has been the disappointing funding efficiency over the previous yr. Solely 43% of invested shopper funds have outperformed the benchmark within the final yr. It’s not an ideal advert for the enterprise when attempting to draw new cash.

Attractively priced

The primary purpose why I’m tempted to purchase is that the share price lately hit the bottom degree in a decade. Based mostly on the present figures, the price-to-earnings ratio is 11. This ratio is near what I might name a good worth. So though the inventory might preserve falling, it’s now ready the place it might fall into undervalued territory. Due to this fact, I really feel that any additional losses ought to be comparatively small, as worth consumers would doubtless step in and snap up some Ashmore shares.

Additional, the administration group determined to carry the dividend per share at 4.8p following the latest outcomes. In the event that they have been genuinely frightened concerning the outlook for the enterprise, they might have lower the dividend to assist money movement. This offers me with some hope that issues aren’t as unhealthy because the share price transfer suggests.

A high-risk play

Despite the fact that I mulled it over for some time, I’ll maintain off buying the inventory proper now. The dividend cowl is 0.57, which is under the determine of 1 that I exploit to think about it sustainable. I really feel I have to see some excellent news out first earlier than taking the plunge. Traders who’ve a better danger tolerance than me could be joyful to get entangled proper now. However I simply need to see some indicators of the inventory stabilising first earlier than committing.