The value of the Alternative Investment Market has risen by 30% over the past 12 months. That sort of stellar performance is likely to appeal to investors looking for a home for ISA funds this year. But while AIM has numerous attractions, it’s still a potentially risky source of investments. One way of overcoming that is to focus on the market’s better quality dividend paying shares.
Neil Woodford, the popular fund manager, recently wrote that there’s no other piece of information like the dividend that could more accurately reflect what a business really thinks about its current state of health.
For Woodford, the “walk of shame” of cutting dividends is enough to deter most executives from doing so wherever possible. Moreover, those that ratchet up their payouts do so knowing that they’re creating a bigger burden for themselves in the future. So they need to be confident that dividend growth is sustainable.
The appeal of AIM income stocks
AIM was designed to be a market for smaller, growth-oriented stocks. When successful, that can translate into spectacular capital gains for shareholders. But as a consequence, many of these companies are more likely to raise money from investors than distribute spare cash back to them.
But it’s…
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