Aiming high: Junior stock market to hit £1bn of dividends by the end of the year
Dividends paid out on London’s junior stock market are set to smash the £1bn mark for the first time ever later this year.
Companies listed on the Alternative Investment Market (Aim) are projected to deliver investors £1.16bn by the end of 2018, growing nearly 20 per cent this year and expected to soar another 14 per cent in 2019, according to today’s annual Aim dividend monitor from Link Asset Services.
Over the last six years, Aim dividends have surged at an average annual rate of 18.6 per cent, almost four times faster than the growth rate achieved on the City’s main market.
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Link Mark Services boss Justin Cooper said that three factors lie behind the rise in Aim dividends: "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."
Today’s research also found that between 2012 and the end of 2018, Aim companies will have paid their investors a staggering £5.5bn in dividends.
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Richard Power, head of small companies at Octopus Investments, said: "People often underestimate the dividend-paying capacity of AIM companies. Early-stage fledgling stocks are hungry for new capital, and so don’t tend to pay dividends, but there are hundreds more which are maturing steadily and beginning to generate cash, even after their investment needs are satisfied."
Power added: "Not only are their profits growing, which is supporting dividend growth, but they are increasing the proportion of profits that they distribute too. That means dividend growth can easily outstrip the larger stocks on the main market, many of which have struggled to grow payouts at all in recent years."