Dividends paid out by companies quoted on the Alternative Investment Market (AIM) rose by nearly a quarter to £633 million in the first half of 2019. At the current run rate, the overall dividend payout from AIM stocks has tripled since 2012.
For investors, the eye-catching appeal of AIM is the possibility of finding high growth stocks that come with attractive tax benefits. But with nearly 900 companies on the market, what do the latest figures really say about AIM dividends, and what should an income investor be looking for?
Dividend data in 2019
According to research by Link Asset Services, the growth in payouts from AIM shares in the first half of 2019 was bolstered by unusually large special dividends. Strip them out though, and the underlying payout still came in at £571 million. That’s 13.9 percent higher than the first half of 2018. A little under half of the increase was derived from new company listings.
Last year, the overall dividend payout from AIM stocks crossed the £1 billion marker for the first time (coming in at £1,116 million) and Link believes 2019 is set for another record full-year total.
In terms of large-paying sectors, the fastest underlying dividend growth in 2019 has come from healthcare, financials, and industrial goods and support companies. Retail, on the other hand, saw payouts fall, largely because Conviviality went bust, while payouts also fell in the building materials & construction sector.
Expectations for the year ahead
Looking ahead, the forecast dividend yield for the whole of AIM currently stands at 1.5 percent. But when you exclude non-dividend paying stocks, the yield rises to 2.5 per cent. As Link points out, that’s only a little way behind the 3.1 percent from the mid-caps on the main market, although some way off the 4.5 percent yield from the FTSE 100. Overall, the payout forecast stands at £1,304 million in 2019, up 16.8 percent in headline terms on what we saw in 2018.
For investors, these dividend expectations are fairly upbeat considering that the main AIM All Share index fell sharply last autumn and has been flat for much of 2019. The lack of a rally in smaller stocks - which we’ve also seen in the FTSE SmallCap index - perhaps reflects the risk-off nature of investors uncertain about how issues like Brexit might affect smaller firms.
Arguably,…
