Dividend bonanza as junior market payouts top £1bn

● New report highlights importance of London’s Alternative Investment Market

London’s junior Alternative Investment Market (Aim) has “come of age” after dividend payouts smashed through the £1 billion mark.

The collective shareholder payout for 2018 is set to reach £1.16bn, almost three times larger than the £417 million distributed to investors in 2012, according to today’s Aim Dividend Monitor from Link Asset Services.

Over the last six years, dividends generated by London’s junior stock market have surged at an average annual rate of 18.6 per cent, almost four times faster than the growth rate achieved on the main market. This year’s total will be 19.6 per cent higher, year-on-year, marking a new record.

The report does note some key differences to the main stock market, however. Only one in three Aim companies pays a dividend – though this proportion has been rising – compared to four-fifths of those on the main market.

The yield, which compares dividends to the market value, is also lower at 1.2 per cent compared to the main market’s 3.9 per cent.

Meanwhile, the top ten largest payers on Aim only account for 24 per cent of the total, compared to more than half the total on the main market.

Aim dividend payouts are dominated by Uk-focused firms, many of them in manufacturing and industrial services, with IT also featuring prominently. Main market divis, by contrast, are dominated by multinational heavyweights, particularly in oil, resources and banking.

Justin Cooper, chief executive of Link Market Services, said: “We rightly associate Aim with young companies, hungry for capital to grow.

“The value of capital being returned to investors via dividends is still much smaller than the amount being raised for investment, but the speed at which dividends are growing shows that more and more companies are coming of age, and reaching that important milestone where they generate more cash than they absorb.

“It’s frankly astonishing to see such consistent and such dramatic growth year in, year out.

“Three factors lie behind the trend to higher Aim payments,” he added. “First, and most importantly, many companies on Aim are maturing, so distribution is becoming an important part of their investment story.

“Secondly, the size of new companies joining Aim is larger, and larger companies generally tend to pay bigger dividends. Finally, new companies joining Aim are paying dividends at an earlier stage than in the past.”

Marcus Stuttard, head of Aim and UK primary markets at the London Stock Exchange Group, said: “In the 23 years since the launch of Aim, more than 3,800 UK and international companies have joined to raise over £110bn through initial public offerings and follow-on issuances. In that time the market has grown and matured.”