The FTSE 250 share I’m at this time might be precisely the form of inventory I wish to purchase. Low-cost, with lots of money, and a really excessive dividend yield.

After all, it’s not fairly that straightforward. The corporate in query is asset supervisor Ashmore Group (LSE: ASHM). This £1.2bn agency specialises in rising markets and is led by founder Mark Coombs, who can be a 29% shareholder.

Sadly, Ashmore’s share price has tumbled 70% from the file highs seen in February 2020. I reckon that wants some rationalization.

What’s happening with Ashmore shares?

Rising markets could be tough for traders to entry straight. There’s additionally a steep studying curve. For these causes, I believe Ashmore’s specialist technique is engaging as a enterprise mannequin.

The issue is that traders have been pulling cash out of rising markets funds over the previous couple of years. Presumably they’ve been investing the money elsewhere, maybe in US tech shares, which have outperformed most different markets.

Ashmore’s complete property underneath administration have fallen from $94.4bn in June 2021, to simply $49.5bn on the finish of June 2024.

Asset managers’ charges are normally calculated as a proportion of property underneath administration. When property are down, payment earnings (and earnings) fall sharply.

That’s what has occurred right here. Ashmore’s working revenue has fallen from £267m in 2021 to lower than £80m final 12 months.

Is Ashmore at a turning level?

It’s been a tough interval for Ashmore. However in my expertise, shifts like this hardly ever final perpetually.

Sooner or later, I’d think about that traders will begin to shift some capital again into rising markets.

One constructive signal for me is that the efficiency of Ashmore’s methods appears to be bettering.

The corporate’s funds delivered constructive funding positive factors in 2022/23 and through the six months to December 2023.

If Ashmore can prolong this constructive efficiency to the 12 months ended 30 June 2024, I’m wondering if traders may begin to get once more – particularly with a market correction seemingly underway in US markets.

Money-backed dividend seems protected to me!

Coombs was prudent through the good years and constructed up an enormous money buffer at Ashmore. The newest stability sheet (31 Dec 23) confirmed £590m of surplus capital, together with £452m of money.

The corporate’s surplus capital is value about half the present £1.2bn market cap.

Dealer forecasts price the inventory on about 15 instances earnings. However stripping out surplus property reduces this price-to-earnings a number of to round 7.5. That appears low cost to me.

Though the ten% dividend yield isn’t absolutely lined by earnings in the meanwhile, I reckon the group’s money reserves imply the payout will stay protected.

In spite of everything, I estimate that founder Coombs receives a £35m dividend every year by means of his 29% shareholding.

I believe the principle danger right here is that it’s unattainable to know when (or if) Ashmore will begin to entice vital new consumer money once more. Till that occurs, earnings will in all probability stay weak and will fall additional.

Because of this, Ashmore shares usually are not with out danger. However on stability, this inventory seems significantly low cost to me. If I used to be seeking to purchase an asset supervisor at this time, it’s a enterprise I’d think about.