AIM's biggest dividend payers for 2015

There are plenty of AIM companies that pay dividends despite what some people think and some of the dividends provide a high yield for investors.

Sometimes high dividend yields equate with a declining business where the dividends may not be maintained in the long-term. However, paying high dividends does not necessarily mean that the business is not growing; those companies can also generate decent capital growth. As long as the companies can generate the cash to pay the dividends then there is not a problem with maintaining or increasing the payout.

The five companies in this portfolio do not necessarily provide fast-growing dividends, but they do generate serious income for shareholders and should at least be able to maintain and maybe also edge upwards in the future.

GVC Holdings

Online gaming company GVC has one of the most attractive yields on AIM and the successful acquisition and integration of part of Sportingbet has enhanced its prospects. The latest trading statement shows a sixth quarter of revenue growth, helped by an increased contribution from mobile. As well as a regular quarterly dividend there is scope for further special dividends.

The fourth quarter has not ended and net gaming revenues have already passed the third quarter figure. This has been achieved despite a strong third quarter in sports betting due to the World Cup. This was reflected in the special dividend of €0.025 a share that was paid along with the recent quarterly dividend of €0.125 a share. That reflected the one-off benefits of the World Cup, but there is potential for more special dividends when trading is better than expected.

Prospective dividend yield: 8.2% (excluding special dividends)Market capitalisation: £297.9 millionShare price: 486p% change year to date: +37%

GVC can still afford to invest in mobile technology and its sportsbook on top of paying the dividend. Most of the company’s trading activities are outside of the UK so it will not be hit as hard as some competitors by the new HMRC tax regime on online gambling. A 2014 profit of €46 million is forecast and a similar outcome is forecast for 2015, which lacks a major sporting event. An unchanged dividend of €0.5 a share would be equivalent to more than two-thirds of forecast earnings.

GVC did stop paying dividends for a short period while it acquired Sportingbet, and that could happen again if a large deal is found. However, one of the main uncertainties about the dividend is movements in the €/£ exchange rate because the dividends are announced in Euros. The first quarter dividend was equivalent to 9.87p a share, while the second quarter dividend was 9.79p a share. At the moment, €0.125 is equivalent to 10p a share, though. Stripping out the special dividends, the full year dividend is equivalent to around 40p a share.

GLI Finance

Guernsey-denominated GLI Finance provides finance to small businesses and there is plenty of demand for its services in the current economic environment. The strategy of the business is to provide a steady dividend income while it maintains a solid asset base. GLI has been paying quarterly dividends of 1.25p a share (5p a year) and this is set to continue. The company’s revenues are predominantly from interest income with an additional contribution from dividends.

Prospective dividend yield: 8.6%Market capitalisation: £100.7 millionShare price: 58.25p% change year to date: +14%

GLI has paid £37.75 million - 31.4 million shares at 56.5p each and 20 million zero dividend preference at £1 each - for Jersey-based Sancus, which has built up an existing loan portfolio of £43.1 million in less than 12 months and has potential to expand in other offshore jurisdictions. GLI already owned 8.4% of Sancus. The zero dividend preference shares have a final capital entitlement of 130.696p a share in December 2019 - a return of 5.5% a year - and help to improve dividend cover. Sancus provides additional management experience to the group and potential access to additional funding.

GLI is being reorganised into two divisions: lending, which will manage the company's loans, and platforms, which lend the money. The target asset mix is 30% smaller business platforms and 70% loans made by the platforms. GLI's platform investments include UK peer-to-peer lender FundingKnight, UK trade finance provider TradeRiver Finance and US online lender Raiseworks.

Entu 

Home improvement products installer Entu (ENTU) has been on AIM for fewer than two months so it is yet to pay a dividend. No new money was raised at the time of the flotation because the business is cash generative enough to cover capital investment and dividends. An initial dividend of 1.5p a share is expected to be paid for 2014 but a 2015 dividend 8p a share is forecast.

Trading is in line with expectations, with demand for home improvement and energy efficiency products increasing. Edison forecasts a 2014 profit of £10 million on revenues of £119.4 million, rising to £11 million on revenues of £127.6 million in 2015. Net cash is expected to be £4.2 million at the end of 2014 and the cash pile will continue to increase unless Entu makes further acquisitions. A dividend of 8p a share would be covered 1.6 times by forecast earnings.

Prospective dividend yield: 7.7%Market capitalisation: £67.9 millionShare price: 103.5p% change year to date: +3.5% (based on flotation price)

Entu generates most of its revenues from windows, doors and solar panels, but the focus is increasingly on energy efficiency products. Manufacturing is outsourced and installed by the company's Job Worth Doing national installation business. Entu has grown by acquiring a number of regional brands, including Zenith, Weatherseal, Penicuik, Staybrite Solar, Europlas and Norwood. The group's market share of the home improvement sector is estimated at 2.6%.

Vianet 

Fluid monitoring and machine-to-machine systems supplier Vianet should be able to maintain its dividend and, if its profit recovers significantly, the dividend could start to increase again. The current total dividend is 5.7p a share and this set to be maintained for a third year, although the dividend cover will fall below two times.

Uncertainty about the pubs market has hit sales of the core fluid monitoring products and the ending of this uncertainty should enable sales levels to recover. The statutory code for pub companies is in legislation that could become law next spring, although there may be legal challenges from pub companies. That could prolong uncertainty and delay recovery. In the six months to September 2014, revenues improved from £9.01 million to £9.14 million, while underlying profit rose from £1.3 million to £1.52 million as fuel services returned to profit and the vending division improved its contribution. Both those divisions have the ability to make significantly bigger profit contributions.

Prospective dividend yield: 8.1%Market capitalisation: £19.1 millionShare price: 70.5p% change year to date: -8.4%

Group full-year profit is forecast to fall to £2.6 million this year and the shares are trading on just over seven times prospective earnings. Profit should start to recover from next year, but the dividend is likely to remain less than twice covered.

Fletcher King 

Property services and asset management provider Fletcher King has consistently paid dividends over the past decade, although the dividend was reduced from a peak of 4.75p a share in 2006-07 to 1p a share in 2008-09 before rising to 1.5p a share in 2010-11 where it remained until last year. The latest total dividend is 3p a share, which cost £276,000. The interim dividend has been doubled again to 1.5p a share so even if the final is maintained this year’s total could be 3.75p a share.

The dividends have been well covered by annual cash generation and there was £2.34 million in the bank at the end of October 2014, a low point following the payment of bonuses. The net asset value (NAV) was £3.75 million.

Prospective dividend yield: 7.1%Market capitalisation: £4.84 millionShare price: 52.5p% change year to date: +41.9%

In the year to April 2014, revenues improved from £3.03 million to £3.65 million, while pre-tax profit jumped from £292,000 to £711,000, although that includes a £174,000 gain on the sale of its investments in the syndicated property investments Stratton House Investment Properties Limited Partnership 06 and 11. The latest interim profit improved from £147,000 to £293,000 without any disposal gains.

Management admits that it will be difficult to achieve the same level of profit this year, but the investment market in London and the South East is still strong and more offices have been added to the management portfolio. There is demand for syndicated property investments, but finding the right properties is not easy. The underlying earnings multiple is less than 10.