Yahoo Finance Tatton Asset Management (LON:TAM) Is Increasing Its Dividend To UK£0.085
Tatton Asset Management plc (LON:TAM) will increase its dividend on the 2nd of August to UK£0.085. This takes the annual payment to 3.3% of the current stock price, which is about average for the industry.
See our latest analysis for Tatton Asset Management
Tatton Asset Management's Earnings Easily Cover the Distributions
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 made up quite a large proportion of earnings but only 57% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
Earnings per share is forecast to rise by 8.0% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 91%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.
Tatton Asset Management Is Still Building Its Track Record
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. Since 2017, the dividend has gone from UK£0.044 to UK£0.13. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
Tatton Asset Management Might Find It Hard To Grow Its Dividend
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Tatton Asset Management has grown earnings per share at 50% per year over the past five years. However, Tatton Asset Management isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.
Our Thoughts On Tatton Asset Management's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Tatton Asset Management is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Tatton Asset Management that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
