Tatton Asset Management (LON:TAM) Is Paying Out A Larger Dividend Than Last Year

The board of Tatton Asset Management plc (LON:TAM) has announced that it will be paying its dividend of £0.10 on the 15th of August, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

Check out our latest analysis for Tatton Asset Management

Tatton Asset Management's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Tatton Asset Management's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 28.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 61%, which is in the range that makes us comfortable with the sustainability of the dividend.

Tatton Asset Management Doesn't Have A Long Payment History

Tatton Asset Management's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of £0.044 in 2018 to the most recent total annual payment of £0.145. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. Tatton Asset Management has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Tatton Asset Management has seen EPS rising for the last five years, at 39% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Tatton Asset Management Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Tatton Asset Management that investors should take into consideration. Is Tatton Asset Management not quite the opportunity you were looking for? Why not check out 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.