Dividends paid out to investors by small and medium-sized firms on the junior stock market jumped 24% to a new a record total of £633m in the first six months of 2019.
According to the latest Alternative Investment Market (Aim) dividend monitor from Link Group, investors are on target to pocket well over £1bn from Aim-listed firms for a second year despite the uncertainty surrounding Brexit.
Link Group said the returns recorded over the first half of the year were flattered by unusually large “special” dividends, but even on an underlying basis, the £571m total was 13.9% higher compared with the first half of 2018. A little under half of this increase was contributed by new listings.
The figures are likely to fuel concerns that businesses are handing shareholders funds that should be set aside for investment. Unions are are also likely to be dismayed at the high level of profits set aside for shareholders when workers’ pay remains subdued.
The Aim was launched in 1995 as a growth market dedicated to small and medium-sized companies. It provides access to investment finance that may be too large for founders to raise privately. Its lighter touch regulatory structure makes it a riskier place to invest than in more established firms.
Link Group said the strong start to 2019 followed a 15% increase in 2018, taking Aim companies’ total payouts to £1,116m last year, breaching the £1bn mark for the first time.
Among the larger-paying Aim sectors, the fastest underlying growth so far this year has come from healthcare, financials, and industrial goods and support companies.
However, Aim’s listed retailers paid out a fifth less year-on-year, thanks mainly to the bankruptcy of Conviviality. Building materials and construction dividends also fell.
Michael Kempe, the chief operating officer at Link Market Services, said: “Fewer Aim companies pay dividends than their main-market counterparts, simply because 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.”
Despite the dividend growth, he said the value of Aim companies has fallen sharply over the last year, as investors face an uncertain, and potentially damaging, Brexit outcome.
“The trend of dividends from Aim companies remains upwards, and that should drive shareholder returns. In this context, braver investors may consider current low valuations of Aim stocks as an opportunity,” he said.
