Tatton Asset Management (LON:TAM) Could Be A Buy For Its Upcoming Dividend

Tatton Asset Management plc (LON:TAM) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Tatton Asset Management's shares before the 27th of November in order to receive the dividend, which the company will pay on the 19th of December.

The company's upcoming dividend is UK£0.12 a share, following on from the last 12 months, when the company distributed a total of UK£0.19 per share to shareholders. Looking at the last 12 months of distributions, Tatton Asset Management has a trailing yield of approximately 2.7% on its current stock price of UK£6.98. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tatton Asset Management paid out 69% of its earnings to investors last year, a normal payout level for most businesses.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

See our latest analysis for Tatton Asset Management

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Tatton Asset Management's earnings per share have been growing at 13% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last eight years, Tatton Asset Management has lifted its dividend by approximately 20% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Tatton Asset Management worth buying for its dividend? Tatton Asset Management has an acceptable payout ratio and its earnings per share have been improving at a decent rate. In summary, Tatton Asset Management appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while Tatton Asset Management has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Tatton Asset Management has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.