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AIM dividends come of age
Dividends paid by AIM-quoted companies are set to burst through the £1bn mark for the first time in 2018 according to Link Asset Services’ inaugural annual AIM Dividend Monitor.
Launched in 1995 as a growth market for small and medium-sized companies, AIM market-derived dividends are growing rapidly and far outstripping the pace set by their main market counterparts.
Indeed, Link expects growth of 19.6% to a record £1.16bn in 2018, almost three times larger than the modest £417m distributed by AIM companies to shareholders in 2012, with growth of at least 14% anticipated in 2019.
Conventional wisdom has it that small companies go for growth and only consider paying dividends as their businesses mature. But AIM companies are increasingly paying an income to their shareholders.
The increasing maturity of many AIM companies, the larger size of new listings and a speedier path to dividend payment are behind the trend, says Link Asset Services.
The report reveals that over the last six years, AIM dividends have surged at an average annual rate of 18.6%. This is almost four times faster than the 4.9% growth rate achieved on the Main Market, although special dividends from AIM firms were much lower in 2017 than in 2016, which saw some very large one-off specials, and look set for a modest out-turn for 2018 too, Link looking for ‘around £17m this year’.
A great example of the way in which AIM is maturing and the path to dividend distributions is speeding up is premium tonic mixer maker Fevertree Drinks (FEVR:AIM), a go-go- growth stock which debuted on AIM in 2014 and is already serving up progressive payouts.
An AIM dividend stalwart of note is flooring specialist James Halstead (JHD:AIM), which has the best record of any UK- company for its steady increases in dividends every year.
However, AIM’s largest company by market cap is ASOS (ASC:AIM), which has still not paid its first dividend. And despite the current trend showing rapidly growing payouts, earlier-stage businesses are still much less prone to paying dividends.
Link expects 257 AIM companies to pay a dividend this year, just under one third of all those listed on the exchange, yet on the Main Market, almost four fifths of companies will distribute cash to shareholders this year. And as a whole, the yield on the AIM market is roughly two-thirds lower than on the big board.