Dividends paid out by the AIM index are set to drop by at least 34 per cent in 2020 as companies battle with the coronavirus crisis and the subsequent recession.
According to Link’s latest dividend monitor, published today (September 7), the best case scenario sees AIM dividends dropping 34 per cent to a headline £873m this year, down from a record £1.33bn paid out in 2019.
In the worst case option, Link predicted AIM dividends tumbling by nearly half (48 per cent) to just £698m.
The monitor showed dividends had fallen an “unprecedented” 33.6 per cent in Q2, as two fifths of AIM payers cancelled their dividends outright while a further tenth reduced them year-on-year.
But AIM dividends were more resistant than the FSTE payouts, where payouts halved in the second quarter of the year. About two fifths of companies reduced payouts on AIM compared with three quarters on the main market.
A culture of dividend paying has been steadily growing on AIM. In 2019, 290 companies distributed cash to shareholders, up from 263 in 2018 and the proportion paying cash to shareholders grew from 26 per cent in 2012 to 35 per cent last year.
Susan Ring, CEO corporate markets of Link Group, said: “The fact that AIM dividends fell less than the main market must be seen in the context of long-term AIM underlying dividend growth of 18 per cent per annum.
“The change from an increase of that size to a sudden decline of one third is consistent with the magnitude of main market dividend cuts we have reported in our main UK Dividend Monitor.”
Ms Ring said AIM’s payouts would “certainly bounce back” in 2021, but noted they were unlikely to top 2019’s total until 2022 or 2023 at the earliest.
She added: “This AIM recovery will be faster than on the main market, where it will take time to make up for the loss of £7.8bn from Shell alone.”
Income investors are facing a multi-billion pound dividend shortfall this year as companies scrapped payouts to shareholders amid the crisis.
Banks and insurers were forced to suspend payments by the Bank of England as the central bank looked to bolster such firms throughout the crisis.
The government then blocked large businesses borrowing cash from the government to support themselves through the crisis from paying out dividends to shareholders.
Others culled their payouts on their own accord to maintain a cash buffer in the economic crisis.
imogen.tew@ft.com
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