Hargreaves & L advice7 Aug 2018 13:36
Picking AIM shares
It might sound obvious, but ultimately the successful companies are those that generate profits. That’s not something you tend to see with all smaller businesses. In fact, a surprisingly large number never make any profits at all.
Ideally you also want those profits to be turning into cold hard cash. Cash is money a company actually has in the bank to pay down debt and invest in growth. Without it, growth has to be funded by debt and that makes companies vulnerable to a downturn.
Searching through the 944 companies listed on AIM to find one that matches these attributes is a tough ask. But a useful cheat can be looking for companies that pay a dividend.
Dividends can only be paid out of profits, and since they’re usually paid in cash, they’re a good indicator of cash generation as well. We also think that the decision to pay a dividend shows that directors have investors’ interests front of mind.
https://www.hl.co.uk/news/articles/finding-winners-on-aim