Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Tatton Asset Management plc (LON:TAM) is about to go ex-dividend in just three days. You can purchase shares before the 16th of July in order to receive the dividend, which the company will pay on the 28th of August.
Tatton Asset Management's next dividend payment will be UK£0.064 per share, and in the last 12 months, the company paid a total of UK£0.096 per share. Last year's total dividend payments show that Tatton Asset Management has a trailing yield of 3.3% on the current share price of £2.91. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Tatton Asset Management has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Tatton Asset Management paid out 64% 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.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Tatton Asset Management's earnings per share have plummeted approximately 58% a year over the previous five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last three years, Tatton Asset Management has lifted its dividend by approximately 30% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
From a dividend perspective, should investors buy or avoid Tatton Asset Management? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
With that being said, if you're still considering Tatton Asset Management as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 2 warning signs for Tatton Asset Management that we recommend you consider before investing in the business.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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