Investors who want to cash in on Tatton Asset Management plc’s (LON:TAM) upcoming dividend of US$0.028 per share have only 3 days left to buy the shares before its ex-dividend date, 22 November 2018, in time for dividends payable on the 14 December 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Tatton Asset Management’s latest financial data to analyse its dividend attributes.

See our latest analysis for Tatton Asset Management

Here’s how I find good dividend stocks

If you are a dividend investor, you should always assess these five key metrics:

• Is it the top 25% annual dividend yield payer?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has it increased its dividend per share amount over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

How does Tatton Asset Management fare?

The company currently pays out 101% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 69%, leading to a dividend yield of 3.6%.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Tatton Asset Management as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.

Relative to peers, Tatton Asset Management has a yield of 3.6%, which is high for Capital Markets stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into Tatton Asset Management’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three key factors you should further research: