Interactive Investor

The AIM stocks still paying – and growing – dividends

14th August 2020 15:00

Andrew Hore from interactive investor

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Our award-winning AIM writer picks through the doom and gloom of dividend cancellations to find the companies still returning money to investors.

Four months ago, it seemed as though all AIM companies were cancelling the dividends they had announced or were deciding not to pay one. Some bucked the trend, while others are now returning to paying dividends. 

Some companies, such as Restore (LSE:RST) and Appreciate (LSE:APP), are not paying dividends because they are still receiving government assistance, but they intend to pay dividends in the future. 

There are plenty of companies that are still paying growing dividends, as well as maintaining payouts. Here is a selection with the quoted yields based on current expectations for this financial year.

Rising dividends

Disinfection products supplier Tristel (LSE:TSTL) has grown strongly and this has been supplemented by additional demand due to Covid-19. In the year to June 2020, revenues were one-fifth ahead at £31.6 million and pre-tax profit improved by a similar degree to at least £6.8 million. Some of the additional demand is likely to continue as cleaning regulations and standards are strengthened. 

Net cash improved to £6.2 million and this figure will continue to grow after paying increased dividends. The dividend is forecast to grow from 5.5p a share to 6.3p a share. At 445p, the yield is 1.4%. 

In the year to May 2020, NWF (LSE:NWF) benefitted from strong demand for heating oil due to home working.

There were bumper profits from the fuel distribution business in the year. The division’s operating profit nearly doubled to £11 million and this will not be repeated this year. The opening costs of the new Crewe facility led to a dip in profit contribution from food distribution. The feeds business increased market share but profit fell. 

Group pre-tax profit improved from £9.7 million to £11.5 million. Total dividend increased from 6.6p a share to 6.9p a share. A pre-tax profit of £10.7 million is forecast for next year. A further dividend increase to 7p a share is possible. At 205p, the yield is 3.5%.

Self-storage sites operator Lok’nStore (LSE: LOK) has consistently grown its dividend by 1p a share each year and this is set to continue.

This year it will be 13p a share. Revenues have increased even though there was weaker trading during lockdown. Profits could fall slightly but the finances are strong. At 585p, the yield is 2.2%. 

Compliance services provider Sureserve (LSE:SUR) continues to trade well, although the energy services business was hit by the lockdown. Improved efficiency is helping margins. Forecasts for 2019-20 were downgraded at the time of the interims, but pre-tax profit is still forecast to improve from £8.3 million to £9.3 million. 

The full-year dividend is still expected to increase by 50% to 0.75p a share. Even so, strong cash generation means that net debt should be wiped out by the end of September 2020. At 42p, the yield is 1.8%. 

Broker Jarvis Securities (LSE:JIM) is benefitting from increased share trading levels. Interim profit was 50% ahead at £3.6 million. Revenues were 31% higher at £6.8 million. Jarvis is succeeding with a low-cost share trading offer and outsourced admin for brokers and fund managers. A dividend of 14p a share was announced with the figures. Jarvis had already paid two quarterly dividends of 17.75p a share.

The first-half growth sparked an upgrade in full-year pre-tax profit and dividend. WH Ireland had forecast an improvement in pre-tax profit from £4.8 million to £5.5 million in 2020, but this has been raised to £6.8 million. 

The broker still believes this could be conservative because it does not assume that the bumper trading levels continue.

The total dividend, which has grown consistently, is expected to jump from 26.25p a share (although that does not include a 15p a share special dividend) to 37.5p a share this year. At 730p, the shares yield 5.1%.

Kettle components supplier Strix (LSE:KETL) is paying a consistently growing dividend, but earnings per share are likely to slip this year a disruption in supply and demand because Covid-19 will lead to a dip in revenues.

Even so, the expected increased from 7.7p a share to 7.9p a share will still be covered 1.7 times by earnings. The share price, at 224p, is well ahead of the level at the start of 2020 and the yield is still 3.5%.

Communications services provider Gamma Communications (LSE:GAMA) is trading ahead of consensus expectations. This is despite Gamma allowing customers that were temporarily unable to trade to hibernate services until the end of June – that cost £1.2 million in profit.

Full-year pre-tax profit is forecast to improve from £48 million to £58.2 million through a combination of acquisitive and organic growth. Total dividend is anticipated to increase from 10.5p a share to 11.6p a share. At £17.05, the yield is 0.7%. That is modest but should grow.

Healthcare IT supplier EMIS (LSE:EMIS) says that trading is in line with expectations thanks to high recurring revenues, and this means that it can still pay a growing dividend. Pre-tax profit is expected to fall slightly this year, but the expected dividend of 32.6p a share, up from 31.2p a share, will be covered by earnings 1.5 times. Net cash was £44.1 million at the end of June 2020. At £10.62, the yield is 3%.

Maintained dividends

Franchise Brands (LSE:FRAN) paid a 2019 final dividend in shares rather than cash. The interim dividend was unchanged at 0.3p a share. The total dividend is expected to be unchanged at 0.95p a share and it will still be covered four times by earnings. At 92.5p, the yield is 1% with the prospect of it increasing to 1.5% in 2021. 

Wynnstay Group (LSE:WYN) has consistently grown its dividend since joining AIM, but the agricultural and feed products supplier is expected to maintain the dividend at 14p a share this year.

That is because profit is expected to fall for the second year in a row. The dividend still has a cover of two times. The share price has recovered to 332.5p since the interims in June and the yield is 4.2%. There is also a 32% discount to net asset value (NAV).

Returning payers

Vimto maker Nichols (LSE:NICL) originally announced a final dividend for 2019 but decided it was prudent not to pay it. The 28p a share dividend will be paid as this year’s interim. Not paying the final dividend saved more than £10 million and helped the net cash figure grow to £46.7 million at the end of June 2020.

When the full-year figures are released the board will make a decision on the final dividend for this year. This will be based on how much the company can afford for the two-year period to December 2020.  

So far, 40.4p a share has been paid and announced. Interim profit declined and the full-year outcome will be lower than the £32.4 million for 2019.

Hargreaves Services (LSE:HSP) did not pay an interim dividend (previously 2.7p a share) but it has announced an unchanged final dividend of 4.5p a share. This year the total dividend could return to the 7.2p a share paid in 2018-19.

On top of that, cash distributions from the German associated company will let Hargreaves pay a 12p a share additional dividend and that could last for at least three years. At 227p, the yield on the normal dividend is 3.2%. There is also a 44% discount to NAV. 

IPTV software and hardware supplier Amino (LSE:AMO) did not announce a dividend with its interim figures, but it is expected to pay a final dividend of 5.6p a share – the same as the 2017-18 final – before returning to the previous total dividend of 7.3p a share in 2020-21. At 130.5p, the 2019-20 yield is 4.1%.

Miners

Gold miner Pan African Resources (LSE:PAF) is not a new dividend payer, but it had not paid one since 2017. The 2018-19 dividend was 0.1518 cents (0.11725p) a share for 2019. 

The stated strategy is to pay 40% of net cash generated by operating activities after adjustments for contractual debt repayments and one-off items. Capital expenditure is reducing and that gives the opportunity to pay a much more significant dividend.

Edison Investment Research believes that there could be enough spare cash to pay 1.52 cents a share for the year to June 2020. At 23.9p a share, the yield is 5%. A further increase to 1.75 cents a share is expected. Net debt should still fall rapidly.

The rising gold price is also generating significant cash for Caledonia Mining (LSE:CMCL) and this will help to boost the dividend as well as fund capital investment. Caledonia paid a total dividend of 27.5 cents a share in 2019 and a 35 cents a share total is forecast for this year. At £15.825p, the yield is 1.7%.

Trans-Siberian Gold (LSE:TSG) has paid a combination of regular and special dividends. This means that the dividend payment is not consistent.

A large jump in profit is expected this year on the back of the higher gold price, and production levels should increase over the next few years. At 95p, the consensus forecast yield is 4.1%. 

New payer

Management consultancy Elixirr International (LSE:ELIX) joined AIM last month making it one of the few companies brave enough to float this year. The share price has fallen from the placing level of 217p to 208.5p.

The forecast dividend is 2.2p a share. 

Andrew Hore is a freelance contributor and not a direct employee of interactive investor.

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct. Members of ii staff may hold shares in companies included in these portfolios, which could create a conflict of interests. Any member of staff intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. We will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, staff involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles. 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

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