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Jun 12, 2020

AIM sees widespread dividend cuts

Growth market companies focus on preserving cash

More than 100 AIM-listed companies have halted or axed dividend payments amid the economic damage caused by the Covid-19 pandemic, according to new research.

Between mid-March and late May, 67 companies listed on the London Stock Exchange’s growth market suspended their dividend, 41 cancelled the payment and eight cut it in size, reports MBH Corporation, a UK-based investment holding company.

The announcements have kept coming in June with AIM stocks such as Eco Animal Health, Good Energy, Mind Gym and Wynnstay Properties all announcing changes to their dividend policy to preserve cash. 

MBH says it expects the number of AIM companies paying dividends to fall ‘dramatically’ given the impact of Covid-19 and likelihood of recession. Around a third of the roughly 850 issuers listed on AIM pay a dividend, according to a 2019 study by Link Group.

Companies across regions and market caps have reined in payments to shareholders during the Covid-19 outbreak: by early May, at least 189 of the STOXX Europe 600 index had cut or cancelled dividends, reported Bloomberg

Europe’s financial firms, in particular, have come under pressure to halt payments. In March, the European Central Bank urged lenders in the eurozone to halt dividends and share buyback programs until at least October. Banks and insurance firms in the UK have also cancelled payouts following requests from the Bank of England. 

In the US market, 150 companies announced a suspension of dividend programs between March 16 and May 31, according to an analysis of filings conducted by Intelligze for IR Magazine. A further 34 companies said they would reduce dividend payouts.

Speaking to IR Magazine in April, an IR professional whose company altered its dividend said investors have been broadly supportive of the move. 

‘Many of our shareholders have supported us and understood that this is a short-term decision for the long-term good of the company,’ said the IRO. ‘The institutional shareholders get it, but some of the retail shareholders don’t have the full perspective. That’s where I’ve received more calls asking why we’re doing this.’