Dividends from Aim companies soared by almost a quarter in the first six months of the year amid signs the junior market is becoming increasingly attractive to investors looking for income, according to new figures out today.
Although a number of unusually large special dividends paid out by companies was partly responsible for the 23.9 per cent growth, even stripping those out the increase stood at almost 14 per cent according to financial data firm Link Group.
Inflation-beating payouts by Scottish firms including Edinburgh-based property investor Sigma, Iomart and Smart Metering Systems helped contribute to Aim’s record payout of £633 million during the first six months.
Among the larger-paying Aim sectors, the fastest underlying growth so far this year has come from healthcare, financials, industrial goods and support companies, but retailers paid out a fifth less year-on-year, thanks mainly to the bankruptcy of drinks retailer Conviviality.
Dividends from building material and construction firms also fell.
The current run rate of payouts means that in the 12 months to the end of June 2019, Aim’s dividends had almost exactly tripled since 2012, an annualised growth rate of 18.2 per cent.
By comparison, main market dividends grow 45 per cent over the same period, an annualised 5.9 per cent.
The Aim total over the past year is still relatively small however, only slightly exceeding the payout of Reckitt Benckiser, the 21st largest main-market dividend payer.
Even the main-market small-caps paid £4.8bn over the same period, four times the Aim total.
Michael Kempe, chief operating officer at Link, pointed out that fewer Aim companies pay dividends than their main-market counterparts as so many are “still in their early capital-hungry phase”.
“But not only has the proportion of Aim companies paying dividends risen, but those coming to market are doing so earlier, and those paying them are growing their dividends rapidly,” he said.
“Dividend growth matters because it lies at the heart of share valuations. The faster the growth rate, the higher the value. And the more visible the dividend stream, the more certain an investor can be about its value.
“It is obviously very hard to predict growth rates for young companies, but even the very presence of a dividend in the first place is a useful hygiene factor.”
Over the coming 12 months, Aim stocks are expected to yield a collective 1.5 per cent, up from 1.2 per cent this time last year, owing to a combination of lower share prices and growing payouts.
If, however, companies that do not pay a dividend at all are excluded, the yield of those that do will be 2.5 per cent, only slightly behind the 3.1 per cent from the mid-caps on the main market. The FTSE 100 collectively yields 4.5 per cent.