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Expert View Special: 8 AIM high yielders for your ISA
Here are eight of 10 'super' yielding stocks on the Alternative Investment Market (AIM) identified by Allenby Capital.
Allenby Capital's pick of the best high yielders on AIIM
Investor interest in stocks on AIM (the Alternative Investment Market) has grown since the government made them eligible holdings for ISAs last August. Although the junior exchange is known as a home to many early stage growth companies, nearly a quarter of the 1,100 stocks on AIM have reached a stage where they pay a regular dividend.
The following companies are taken from a 'Dividends on AIM' report by Allenby Capital, a stock broker and corporate adviser. Its analysts looked at the 33 dividend payers yielding more than 4% and winnowed these down to a list of 'super 10' stocks whose dividends and prospects looked the most secure.
We left out two of the stocks for this Expert View Special because they were investment companies and we were unable to generate the chart and company information according to our normal format. The three were: GLI Finance and Juridica Investments.
Belvoir taps into renting craze
Belvoir Lettings (BLV), which services tenants and private landlords owning small portfolios, is a high yielder well placed to tap into a trend towards renting rather than buying.
Yielding 5.2%, Belvoir has a steady dividend track record, having paid out every six months since flotation on AIM in February 2012.
‘The business is highly cash generative, and moreover has been able to tap a loyal institutional base to fund its accelerated growth programme,’ noted the Allenby Capital analysts.
‘Belvoir is on c15 times 2014 consensus earnings, which we feel allows for reasonable upside, given the growth trajectory,’ they added.
The dividend is covered 1.3 times by earnings.
Camkids’ yield charms compensate for China risk
Camkids (CAMK), the manufacturer and distributor of outdoor clothing, footwear and equipment for Chinese children, boasts a strong balance sheet, profitable track record and attractive valuation - ‘more than compensating’ for scepticism around Chinese stocks, said Allenby’s analysts.
Camkids Group joined AIM in December 2012 raising £6.4million with ‘a track record of profitability, low valuation, a healthy balance sheet and an intention to pay an attractive dividend.’
‘The company is highly cash generative and intends to pay c.20% of net earnings as a dividend which should lead to a high and rising dividend stream,’ said Allenby’s analysts.
Camkids yields 6.8% with the dividend forecast to be covered 5.4 times by earnings.
Next: Central Asia Metals
A divi sweetener for longer term investors
Central Asia Metals (CAML) is a longer term investment for patient investors – but in the meantime, a 5.1% dividend yield should keep shareholders happy.
An investment in the AIM stock, a 60% owner and operator of a copper processing facility at the Kounrad mine in Kazakhstan, is ‘essentially backing the management team to further develop Kounrad and replicate performance on additional projects in the future,’ said Allenby’s analysts.
‘There is no evidence to suggest management will not be able to deliver this longer term value growth and a forward dividend of yield of 5.1% is a deal-sweetener for those with less patience.’
They provide a run-down of the numbers: ‘CAML has $47.9m of cash, is debt free, and is expected to generate revenues of $51m giving EBIT of $26.6m.’
The dividend is covered 2.3 times earnings.
Next: DX Group
Freshly-floated DX delivers steady yield
DX Group (DX), which operates a mail service focused on the quality next day delivery of important items, only listed on the stock market in February, but Allenby’s analysts are drawn by this ‘steady dividend yielder’ that was founded in 1975.
‘Although the share price has rallied strongly in the weeks since listing, we feel that DX remains a sound option as a steady dividend yielder with modest growth prospects.’
‘The weak dividend cover in FY 2014 [covered 1.2 times earnings] will improve going forward as a result of the substantially reduced debt pile increasing the ne t figure.’
At the time of the report DX traded on a forward yield of 5.4%.
Next: GVC Holdings
Bet on GVC as it enters new growth stage
Online gaming services company GVC Holdings (GVC) had a tough start on AIM after listing in 2005 but it has now ‘entered an exciting new stage of growth’.
After raising £81 million the group spent its first seven years watching its share price decline, finally turning the business around at the end of 2011 when it established two distinct business segments serving consumers and also businesses.
GVC failed to make Allenby’s top picks last year as analysts waited to see the outcome of the acquisition of SportingBet, which was done jointly with William Hill in March 2013.
‘The acquisition has been complementary to GVC’s existing business. The SportingBet operations are highly cash generative and so are appropriate to GVC’s aggressive dividend policy,’ said analysts.
‘With the integration of the new business and restructuring now complete, we feel that GVC has entered into an exciting stage of growth. The group pays out quarterly dividends and adheres to a progressive policy.’
GVC is one of two companies yielding just over 10%. The dividend is covered 1.4 times by forecast earnings.
Next: Manx Telecom
New recruit Manx Telecom is one to watch
Isle of Man telecommunication company Manx Telecom (MANX) is a new recruit to AIM and is already peaking interest due to its solid growth, although its ‘debt pile’ should not be ignored.
The business, which offers fixed line, broadband, mobile and data centres, is the only operator on the island to operate a fixed line copper network to the c.85,000 residents.
It joined AIM in February, raising £156 million - £89 million from new money and £67 million from 100% disposals by existing private equity shareholders.
‘Manx has exhibited solid growth in recent years, but a substantial pile of debt has prevented this good performance from being reflected in the bottom line,’ said analysts. ‘The [AIM] admission fundraise enabled the company to pay down all outstanding senior debt and loan notes: with a strengthened balance sheet, Manx should be able to reflect its impressive growth through significantly increased profitability.’
In addition it is also eyeing an off-Island mobile technology platform.
Manx shares trade on a forward yield of 6.2% with the dividend covered 1.2 times by earnings.
Next: Nationwide Accident Repairs
Market upturn to help Nationwide pick up
Nationwide Accident Repairs Services (NARS) is set to benefit from ‘anticipated market upturn’ after suffering in 2012 and 2013.
Nationwide is the UK market’s leading provider of automotive repaid and support services, with 63 Nationwide Crash Repair Centres across the country making up its largest business and servicing 175,000 cars a year. It also has Nationwide Network Services that provides accident administration services to insurance companies and additional there is a Mobile Repairs division and glass services, Motorglass.
The company has been hit by fewer claims for smaller repairs in over the past two years due to uncertain economic conditions which last year saw revenue drop and profits before tax reduced 42.9% year on year. This lead to an interim dividend cut.
‘Nevertheless, management remains confident that the group is well positioned to take advantage of the anticipated market upturn as it will be able to leverage its integrated network both in its core insurance market and in its more nascent target markets,’ said Allenby.
Analysts added that outsourcing company Quindell had acquired a 22.5% stake in the company last September and ‘given Quindell’s buy and hold strategy, an offer to acquire the entire company within the next two years would not be surprising’.
Nationwide trades on a 4.6% yield with the dividend slightly uncovered by earnings (0.9%).?
Next: NewRiver Retail
NewRiver dividend shake-up makes it a top yielder
Real estate investment trust (Reit) NewRiver Retail (NRR) made a second successful listing last year that has allowed it to continue on its shopping spree in the UK food and value retail sector and plan a dividend shake-up.
The company is already a substantial player in the retail space as the third largest operator/owner of shopping centres in the UK (it has 25 on its books) and a portfolio of assets worth £600 million.
It focuses on a strict criteria of high income generating businesses within its food and value sector niche, which are ‘traditionally resilient to economic downturn’, said Allenby analysts.
With full year to March 2013 ending strongly it went ahead with a second placing in June and raised £67 million and a further £85 million in January this year.
Analysts added that while special final dividends of 16p have been paid for full year to March 2014 it intends to pay a quarterly dividend in future.
‘Given the company’s strengthened balance sheet, excellent track record and management’s aggressive growth strategy, we have no qualms in recommending NewRiver as one of our preferred AIM divided yielders for 2014.’
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Look up the shares
- Belvoir Lettings PLC (BLVB.L)
- Camkids Group PLC (CAMK.L)
- Central Asia Metals PLC (CAML.L)
- DX Group Ltd (DXDX.L)
- GVC Holdings PLC (GVC.L)
- Manx Telecom PLC (MANX.L)
- Nationwide Accident Repair Services PLC (NARS.L)
- Newriver Retail Ltd (NRRT.L)