The top 50 dividend-paying companies on AIM returned more than 37% over the last 12 months, according to a report by Allenby Capital.
The City firm recorded the progress of the highest yielding 50 companies on the junior market. The average return (including capital gain with dividends reinvested) in the 12 months to February 28 was 37.1% against an average return of 21.8% for all AIM stocks.
More than 250 AIM companies are forecast to pay a dividend in 2014, suggesting that the alternative market could be shaking off the Wild West tag that has long accompanied it.
The broker hailed the impact of allowing AIM stocks to be included in ISAs. While this has helped share prices higher and lowered dividend yields, there are still 33 stocks yielding over 4%.
Traditionally, it is more established companies that can afford to reward their shareholders, while AIM companies typically plough any spare cash back into the business to achieve growth and a subsequent share price rise rather than return it to investors. However, paying a dividend is becoming increasingly popular on AIM.
The average market capitalisation of the 258 dividend payers on AIM is £110mln against £69mln for the total AIM market, proving that the more mature names are more likely to distribute cash.
But Allenby thinks the increasing demand for AIM shares means high yielding stocks are unlikely to beat their non-dividend paying counterparts for another year.
“High yielding AIM stocks outperformed the wider AIM market in 2011, 2012 and 2013. However, with markets recovering and investors’ risk appetite increasing, we feel it is unlikely that high yielders will outperform four years in a row.
“That said, dividend payers generally provide lower risk investments and we feel they should form a core part of any portfolio.”
Allenby picked its ‘super 10’ dividend payers – those it believes are most likely to outperform the market in the year ahead.
Among them are parcel distributor DX Group (LON:DX.) and Isle of Man telecoms group Manx Telecom (LON:MANX), both of which only recently listed on the stock market, and lettings agent Belvoir Lettings (LON:BLV).