The government has allowed AIM stocks to be held in the ISA tax-wrappers for the first time; this has seen a surge of interest in the market which shows no sign of abating. Martin Turner, who manages the CF Miton UK Multi Cap Income fund with Gervais Williams (pictured), says that there has been an increase in the number of companies on AIM offering a decent yield and these companies are getting strong interest from investors.
Turner says that investors have more confidence in companies that are growing their dividends as it is palpable evidence of cash generation.
Here he and co-manager Gervais Williams pick four AIM stocks worth considering for an income-seeking investor.
Fairpoint
Williams and Turner’s first pick is £60m market cap Fairpoint Group, which is yielding 4.8 per cent.
“It’s a company which helps people when they get into debt, maybe they have lost their job for example,” Williams said.
The company offers advice and assistance which often involves setting up individual voluntary arrangements (IVAs) for investors to pay down at a manageable rate.
The managers own 22 per cent of the company which makes up 1.2 per cent of the CF Miton UK Multi Cap Income fund.
Over three years the stock has more than doubled, with it doing particularly well in the AIM surge from last August.
Performance of stock vs index over 3yrs
Source: FE Analytics
The stock is trading on 9 times earnings.
Bloomsbury
“This is a stock that has been growing its income by about 11 per cent a year since it launched onto AIM in 1994,” Williams said.
“It’s only yielding around 3.5 per cent now because of strong share price growth but it was yielding 4, 5 6 per cent recently.”
Data from FE Analytics shows that the stock has risen 70 per cent since last February following a period of choppy performance.
Performance of stock vs index over 3yrs
Source: FE Analytics
The company published the Harry Potter books and is now moving into academic publishing.
Turnover in the four months to the end of last year was up 20 per cent year-on-year, the company announced in its most recent results. Titles by Hugh Fearnley-Whittingstall, Khaled Hosseini and JK Rowling.
It is yielding 3.5 per cent and trading on 13.15 times earnings.
Charles Taylor Group
Williams says that another yielding stock in the financial sector he likes is Charles Taylor Group, an insurance support service company which provides management services and software.
The company is involved in “captive” insurance business for the oil industry. This involves oil companies pooling their resources to insure each others’ assets in a more cost-effective way.
Williams says this is a good business for the company to be involved in and should lead to future growth.
Williams notes that the stock has had a wobble in recent months, but data from FE Analytics shows that it is up 90.57 per cent over three years as the FTS All Share has made 28.86 per cent.
Performance of stock vs index over 3yrs
Source: FE Analytics
The stock is trading on 12.1 times earnings and has a yield of 4.4 per cent.
Amino
Turner says that Amino, currently yielding 4 per cent, is another interesting income stock on AIM.
The company manufactures set-top boxes and does strong international business. With a market cap of just £54m it has returned 140.37 per cent over three years, according to data from FE Analytics.
Performance of stock vs index over 3yrs
Source: FE Analytics
“It’s a UK business but is selling internationally into growing markets,” Turner said. “Set-top boxes take different forms in different markets and Amino is a world leader.”
Miton holds 18.42 per cent of the company and Schroders 16 per cent. Turner explains that there are only two analysts covering the stock, making it a good example of the sort of undiscovered gem which the AIM market offers to stockpickers.
The shares are yielding 3.9 per cent and are trading on 14.1 times earnings.
