Almost 150 AIM companies cancelled, suspended or cut their dividend between mid-March and the first week of October, but the situation has started to improve, according to research from MBH Corporation.
Around a third of stocks on London’s junior market pay a dividend, with some GBP1.3bn paid out in 2019, but the financial fallout from the pandemic in 2020 has understandably hit many companies and hence also their shareholder returns.
Between March 17 and October 5, 2020, 88 AIM companies suspended their dividends, another 41 were cancelled and 17 were trimmed, according to MBH Corporation’s research.
Of these 146 companies, 55% were cancellations, but the situation is now improving, with the period since the start of July seeing 12 suspended dividends, three were cut and no cancellations.
Alternate research by Link Group projects a shrinkage of the AIM dividend list of between 34% and 48% this year to GBP698-873mln, with a recovery to previous highs not likely until 2022 or 2023 at the earliest.
“When it comes to investing in shares, dividends make up a huge part of total returns,” said Callum Laing, CEO of MBH Corporation Plc (FRA:MBH). “Those companies that pay dividends are also more likely to deliver smoother returns that those that rely solely on capital gains.
“Dividends and dividend growth are important indicators of company financial health and potential for longer term growth.”