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AIM IHT portfolios for INCOME? Is it worth it?

AIM isn’t a market that’s generally considered for its dividend and income attractions, and we have always expressed caution on AIM companies paying out high dividends, when they should be putting their cash to better use.  However, the steep decline in share prices of many good-quality AIM companies has seen dividend yields soar to levels not seen since we started managing AIM IHT planning portfolios back in 2004 and the AIM of today is thankfully a far better market than it was back then.

With many AIM companies sitting on plenty of supportive cash, but their share prices languishing, these high yielders also have growth attractions.

We therefore thought it was an appropriate time to reassess the dividend and income potential of AIM companies for IHT planning purposes.

Join us for our webinar AIM IHT portfolios for INCOME? Is it worth it? on 25th November at 3pm. We will discuss the benefits and potential pitfalls of investing in Inheritance Tax qualifying AIM companies for income generation and the potential yield available.

The webinar will cover a number of topics including:

  • State of the AIM market
  • The investable universe of big dividend paying AIM stocks
  • Dividend yields and dividend cover
  • Quality of AIM companies
  • Interest rate considerations
  • Fundamental Asset Management’s high yield AIM portfolio solution
  • Sectors and industries.
  • Portfolio management

 

Sign up to the webinar from the link here

 

The Fundamental AIM IHT Portfolio is a discretionary investment management service where clients can obtain 100% mitigation from Inheritance Tax, benefit from the capital growth afforded by the AIM market and retain control of their assets.

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 18 years, from the link here.

To find out more about the benefits of investing in AIM, or if you wish to discuss the current situation, please speak to our Business Development Manager, Jonathan Bramall, via email [email protected]  or phone 01923 713 894.


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Dividends at risk: apply some cash flow common sense

During these testing times the dividend yield can often prove illusory. While many companies are well-placed to continue supporting their dividends, many others, burdened by high levels of debt and declining cash flow, will be struggling to support the cash payments with short term survival sadly the primary focus.

Faced with a meaningful decline in its clothing and home business, Marks & Spencer (LON:MKS) has decided to cut its final dividend to save £130m. With £4bn of net debt at 30 September 2019 and a £230m interest bill last year it looks a wise move as cash flow declines.

We would like to think that Sage Group (LON:SGE), the provider of accounting and payroll software, should continue to see the cash come in. As a precaution, it has decided to suspend its recently announced share buy-back programme in order to preserve a high level of liquidity, but we think the 3% yield is reasonably safe.

Unilever’s (LON:ULVR) defensive attributes are illustrated by the modest 14% fall in share price over the past 6 months and a resilient performance in March with the shares marginally higher. Unilever has always paid a dividend and the forecast yield of 3.7%, not to mention its fantastic portfolio of everyday products, look extremely appealing in the current low interest rate environment.

It’s a different story for many smaller companies whose earnings and cash flow might be at risk. Despite the luxury of cash in the bank, Quartix Holdings (LON:QTX) prudently announced a cut to its final and special dividend this week.

Johnson Service Group (LON:JSG) is also cutting its dividend.

EMIS Group (LON:EMIS) and Curtis Banks (LON:CBP) both appear to have the desired balance sheets and cash flow profiles to be able to continue to support their dividends. But if the crisis drags on longer than expected even their dividends could be at risk.

Dividend seekers should not be swayed by forecasts, which are rendered meaningless in the current environment, and the focus should be on real balance sheet strength, debt and cash flow. Debt is fine if the cash flow is assured, as has always been the case.

Fundamental General and AIM portfolios include many of the companies mentioned in this post.

If you are looking for high levels of income from your portfolio please speak to Chris or Stephen on 01923 713890

This is an extract of an article published by our associates Investor’s Champion here.