Tatton Asset Management (LON:TAM) Is Increasing Its Dividend To £0.12

Tatton Asset Management plc (LON:TAM) has announced that it will be increasing its periodic dividend on the 19th of December to £0.12, which will be 26% higher than last year's comparable payment amount of £0.095. Based on this payment, the dividend yield for the company will be 2.7%, which is fairly typical for the industry.

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Tatton Asset Management's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Tatton Asset Management's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 33.4%. If the dividend continues on this path, the payout ratio could be 67% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Tatton Asset Management

Tatton Asset Management Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2017, the annual payment back then was £0.044, compared to the most recent full-year payment of £0.19. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Tatton Asset Management has grown earnings per share at 14% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Tatton Asset Management's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Tatton Asset Management that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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