Okay, the global economic recovery is hitting turbulence as Covid-19 cases rise and supply chain issues worsen. But it’s important to remember that recoveries never go in a straight line.
As a UK share investor, I’m pleased that conditions are on the mend. And as a consequence, the dividend outlook for my stocks is improving as well.
A new report on UK dividends from Link Group illustrates how things are getting brighter for income investors in particular. The financial data giant says underlying dividends from AIM companies leapt 56.6% in the second quarter, to £265m.
Including special dividends, the total was up 37% year-on-year in Q2. This, in turn, pushed headline dividend growth for the first half to 40.7%.
Ian Stokes, managing director of Corporate Markets EMEA at Link Group, said “the pandemic has certainly been stormy, but despite the worst recession in two centuries, AIM companies have come through in good shape. They have been eager to restart dividends and the recovery has been blisteringly fast so far.”
AIM dividend rebound to beat the main market
Link Group’s data showed the dividend recovery at AIM companies has been stronger than that of the broader market of late. Indeed, it says the bounceback in AIM dividends has been “more than twice as strong as the main market in the first half.”
Link Group also said that it expects payout growth from AIM companies to slow in the second half of 2021. On an underlying basis, expansion of 24.2% is predicted year-on-year between this July and December.
It explained that “a few companies delayed their payments in 2020 and these timetable effects are mostly going to unwind later this year.”
Still, this means that on a full-year basis, AIM dividends should rebound a healthy 21.9% on an underlying basis, “significantly faster than Link Group’s forecast for the wider market.”
What’s more, the data company said it expects payments from AIM shares to hit fresh all-time highs by 2023. This beats Link Group’s estimates for the main market by around two years.
2 AIM shares on my radar
Investing in AIM shares then, offers some terrific opportunities for income chasers like me. Here are two dividend-paying companies I’m thinking of buying right now:
- I think N Brown is a great UK retail share to buy. This is mainly because of its focus on the fast-growing plus-size fashion segment. I’m also encouraged by its recent move to an e-commerce-only model which should help supercharge sales and push down costs. I’m expecting it to deliver great long-term shareholder returns despite rising competition from the likes of ASOS.
- CareTech Holdings isn’t a cyclical UK share. But I’m tipping the specialist residential care provider to continue growing dividends at a healthy rate in the short-term at least as demand for its unique services balloons (the AIM firm grew the annual dividend 9% in the last fiscal year). I’d buy it despite labour shortages in the post-Brexit environment and the threat this poses to profits.