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Aim stocks: Got dividends if you want them

Hurrah! Savings rates are set to rise from insultingly low to merely pitiful; however, Aim's growth stocks may provide an interesting alternative for income seekers

More than 200 Aim-listed stocks pay dividends

Contrary to popular belief, stocks listed on Aim that pay dividends are not rarer than a clean sheet at Villa Park.

This morning's announcement from Caledonia Mining (LON:CMCL) that it is paying out a dividend for the ninth quarter in a row is not just a reminder that Aim-listed stocks do pay out divis, but also an alert that some of them offer handsome yields.

In Caledonia's case, the yield is around 7.7%, which does not even place it in the top 10 of highest yielding Aim stocks, though given a handful of the junior market's dividend payers appear to be yielding in excess of 25%, the market is clearly not confident all of Aim's dividend payers are likely to keep the cash coming.

That's the crux of the matter, isn't it?

When chasing dividend income, it is wise to do a bit of research and make a call on how likely the company is to maintain its pay-out. In Caledonia's case, it has a 49% interest in the Blanket gold mine in Zimbabwe, which is operating profitably even in these tough times for gold miners, which provides some level of reassurance.

In 2014, the company had earnings per share (EPS) of 12.1 Canadian cents and paid out dividends of six cents, which means it had dividend cover – that's EPS divided by the dividend per share – of just over 2.0, which many sound judges consider a benchmark when trawling for safe income stocks. Higher dividend cover is even better, of course, but the usual caveats apply, namely that even the safest looking dividend can become shaky overnight.

Remember BP, anyone?

Another miner breaking the mould is Central Asia Metals (LON:CAML), a copper producing company operating in Kazakhstan.

In 2014, it paid dividends of 12.5 cents, covered more than four times by earnings, but in 2015 analysts reckon dividend cover will decline dramatically, though the forecast dividend of 8.86p is still covered by projected earnings per share of 9.25p – the analysts apparently prefer to work in pounds, shillings and pence (Are we sure? - Ed.).

So, a little bit on the risky side, but you might reckon the suggested yield of 5.85% make the shares worth a flutter at around 150p a pop.

Caledonia Mining's sector peer, Highland Gold (LON:HGM), also promises a spicy yield, but as well as operating in the desperately out of fashion gold mining sector, it has another strike against it: it operates in Russia, a country viewed by a certain amount of suspicion by modern day lick-spittle capitalist lackeys.

Another red light is it made a loss in 2014, though it still paid out total dividends of 4.5p per share, which for a stock that traded below 40p for the first third of last year is not to be sniffed at.

For 2015, investment analysts predict earnings per share of 8.97p and a pay-out of 3.29p, which is a bit more like it in terms of dividend cover, but given the strikes against the company, you might want to make use of the barge pole in this case.

If former Communist countries are your thing, however, then First Property (LON:FPO) might be a safer bet.

It is a property fund manager with a focus on Central Europe, especially Poland, which as chief executive Ben Habib often observes, was the only European country not to go into recession during the credit crunch in the last decade.

In the year to end-march 2015 it paid out dividends of 1.35p on EPS of 7.21p, giving dividend cover of 5.34, which some might say moves beyond the belt and braces level of caution to include stitching the trousers to the shirt tail as well.

In its interims it upped its dividend by 10% as half-year profits rose to £5.93mln from £5.42mln the year before, while cash at the end of September stood at £14mln.

The full-year dividend is tipped to come in at 1.48p on EPS of 4.90p, which suggests a yield of 2.8%; not utterly sexy but better than you'll get down the bank on most instant access accounts, and the yield would have been a lot higher had it not been for the fact the shares have risen 63% over the last year …

Looking for something a little bit racier?

Brady (LON:BRY), the supplier of trading and risk management solutions for metals, recycling, energy and soft commodities, is projected to pay a dividend of 1.98p for the whole of 2015 (though you are too late for the interim dividend of 1.85p), and is currently priced at 54p, which is a projected dividend yield of 3.67%.

The company has a robust balance sheet, a healthy cash position, no debt and a progressive dividend policy.

The dividend yield is abnormally high at present because of a downbeat trading upbeat at the end of November that depressed the share price, but the shares are picking up, helped by news of three new contract wins just before Christmas.

The above are just some suggestions for further investigation of Aim-listed companies that lay to rest the myth that London's junior market is chock-full of “blue sky” companies that are years away from making a profit.

For sure, many of the dividend payers are only paying out cash to show willing and flag up the fact they are making a profit, and it might help Aim's reputation if the 800lb gorilla of the market, ASOS (LON:ASC) – market cap: £2.78bn; dividend pay-out: beggar-all – returned some cash to shareholders, but there are plenty of solid Aim stocks, such as Utilitywise (LON:UTW), that are offering income as well as rapid profits growth.  

Quick facts: Caledonia Mining Corporation PLC

Price: 1317.5 GBX

Market: AIM
Market Cap: £151.79 m

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Caledonia Mining's Blanket Mine 'a solid performer' despite challenging quarter

Steve Curtis, chief executive of Caledonia Mining Corporation PLC (LON:CMCL, TSX:CAL), tells Proactive's Andrew Scott gold output during the three months to the end of June was marginally higher than the first quarter of 2018, in line with expectations. The Zimbabwe-focused gold miner...

on 08/10/2018

5 min read