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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.

Next: Belvoir

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Key stats
Market capitalisation£36m
No. of shares out24m
No. of shares floating14m
No. of common shareholdersnot stated
No. of employees40
Trading volume (10 day avg.)0m
Profit before tax£1m
Earnings per share6.28p
Cashflow per share6.58p
Cash per share8.92p

*Correct as at 19 Mar 2014

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.

Next: Camkids

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Key stats
Market capitalisation£64m
No. of shares out75m
No. of shares floating13m
No. of common shareholdersnot stated
No. of employees1064
Trading volume (10 day avg.)0m
Turnover88m CNY
Profit before tax19m CNY
Earnings per share0.30 CNY
Cashflow per share0.31 CNY
Cash per share0.18 CNY

*Correct as at 19 Mar 2014

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

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Key stats
Market capitalisation£128m
No. of shares out85m
No. of shares floating59m
No. of common shareholdersnot stated
No. of employees259
Trading volume (10 day avg.)0m
Turnover18m USD
Profit before tax6m USD
Earnings per share0.07 USD
Cashflow per share0.08 USD
Cash per share0.24 USD

*Correct as at 19 Mar 2014

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

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Key stats
Market capitalisation£260m
No. of shares out201m
No. of shares floating196m
No. of common shareholdersnot stated
No. of employees3200
Trading volume (10 day avg.)2m
Profit before tax£-26m
Earnings per share-12.97p
Cashflow per share-9.48p
Cash per share15.06p

*Correct as at 19 Mar 2014

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

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Key stats
Market capitalisation£229m
No. of shares out61m
No. of shares floating41m
No. of common shareholdersnot stated
No. of employees160
Trading volume (10 day avg.)0m
Turnover51m EUR
Profit before tax9m EUR
Earnings per share0.27 EUR
Cashflow per share0.34 EUR
Cash per share0.18 EUR

*Correct as at 19 Mar 2014

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

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Key stats
Market capitalisation£182m
No. of shares out113m
No. of shares floating112m
No. of common shareholdersnot stated
No. of employees278
Trading volume (10 day avg.)0m
Profit before tax£3m
Earnings per share2.80p
Cashflow per share11.22p
Cash per share9.17p

*Correct as at 19 Mar 2014

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

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Key stats
Market capitalisation£36m
No. of shares out43m
No. of shares floating30m
No. of common shareholdersnot stated
No. of employees1920
Trading volume (10 day avg.)0m
Profit before tax£4m
Earnings per share9.22p
Cashflow per share14.77p
Cash per share11.74p

*Correct as at 19 Mar 2014

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

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Key stats
Market capitalisation£273m
No. of shares out99m
No. of shares floating96m
No. of common shareholdersnot stated
No. of employeesnot stated
Trading volume (10 day avg.)0m
Profit before tax£2m
Earnings per share4.70p
Cashflow per share4.86p
Cash per share22.17p

*Correct as at 19 Mar 2014

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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