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When it comes to investing for income, many will think of the FTSE 100. Some will look to the FTSE 250 too. But how many of us ever think of searching Alternative Investment Market (AIM) shares for dividends?
AIM shares are expected to pay out more than £1.2bn in dividends for 2022. So here are 10 of the biggest forecast AIM dividend yields. I’ve omitted companies valued below £50m, to reduce risk. Market-cap can be important when we consider investing in small companies.
| Company | Recent price | 12-month change |
Market cap |
Forecast yield |
| Strix Group | 100p | -60% | £221m | 9.0% |
| Polar Capital Holdings | 517p | -21% | £521m | 8.8% |
| Premier Miton | 117p | -30% | £191m | 8.7% |
| Duke Royalty Limited | 34p | -10% | £143m | 8.2% |
| Central Asia Metals | 282p | +26% | £513m | 7.8% |
| Rosenblatt Group | 67p | -47% | £64m | 7.5% |
| Watkin Jones | 110p | -58% | £286m | 7.0% |
| Jarvis Securities | 162p | -38% | £72m | 6.7% |
| Numis Corporation | 206p | -36% | £225m | 6.4% |
| The Alumasc Group | 160p | -26% | £58m | 6.4% |
Volatility
Judging by some of these whopping share price falls, dividend-paying AIM shares as a whole have been faring a good deal worse than their FTSE 100 and FTSE 250 counterparts,
So AIM stocks can be more volatile than bigger, more stable companies. There’s no surprise there. But it reinforces my caution regarding small-cap stocks, and my need for diversification. But diversification is not just spreading my investment cash across multiple sectors.
No, I want a balance of market-cap sizes too, and I stick mainly to larger-cap companies. If I ever buy AIM shares, they’re only ever likely to take up a couple of slots in my portfolio.
Mining
Central Asia Metals is the only one in the list that’s bucking the downward trend. One year is a short time though, and over five years we’re looking at a 12% fall.
The miner produces a variety of metals in Kazakhstan and North Macedonia, but its copper production is most likely driving the share price. Is there further to go? Forecasts put the price-to-earnings (P/E) ratio down around seven, which still looks good value.
I do see risks here. There’s got to be geopolitical risk, among other things. More research is needed.
Investment
Asset manager Polar Capital looks tempting too. I see the investment business as undervalued across all stock market indices. We’re looking at a P/E of 14, which might not suggest a screaming buy. But with that 8.8% dividend yield, I see a potentially attractive valuation.
I think the biggest risk is a dividend cut, should economic conditions not improve soon. A company of this size is perhaps unlikely to have the resilience of its bigger cousins.
I’ve only picked out a couple of stocks from this AIM dividend list. But this quick look does provide some interesting options for more research. And it shows we can look further afield than the larger-cap indices in our search for income investments.