AIM div­i­dends come of age

Div­i­dends paid by AIM busi­nesses are far out­strip­ping the pace set by their Main Mar­ket brethren

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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.

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