U.K. small-cap stocks are slashing dividends and it’s about to get worse, report finds

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Companies listed on London’s junior stock market have joined their counterparts on the main bourse in cutting or canceling dividends as they look to conserve cash flow.

Between March 17 and May 27, dividends from 67 AIM-listed companies were suspended, 41 were canceled and 8 decided to cut their shareholder payouts in light of current uncertainties, according to research by investment holding company MBH Corporation.

Around a third of AIM stocks pay a dividend, but this number will drop dramatically because of the financial issues caused by the coronavirus pandemic and the significant risk of a recession on the horizon, Frankfurt-listed MBH M8H, +6.09% said.

Since 2012, dividends paid by AIM companies have tripled and in 2018, their aggregate value passed £1 billion ($1.2 billion) for the first time ever. For the first six months of 2019, shareholder payouts on a headline basis (including one-off special dividends) from AIM companies increased by 23.9%. When stripping out the special dividends, they grew by 13.9%.

“Dividend growth has an important role to play in share valuations and they represent a good indicator of company growth. With many smaller listed businesses being unprofitable and generally representing higher levels of risk, in the current environment, dividends are more important than ever,” said Callum Laing, chief executive of MBH said.

MBH itself paid its first-ever dividend of €0.5c earlier this year.

Read:U.K. investors have lost out on more than £30 billion in dividends. It is about to get worse, say analysts.

In April, budget footwear retailer Shoe Zone SHOE, -4.68% scrapped its final dividend for the year to Oct. 5 as turnover for the six months to March 31 was impacted due to the coronavirus lockdown.

Heavitree Brewery HVT, , Quartrix Holdings QTX, -1.38% and Johnson Service Group JSG, -1.70% also all said in March that they proposed no longer paying final dividends prior to their AGM resolution votes to pass the payments.