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An end to the equity dividend?


Most financial market indicators remain optimistic relative to economic indicators, but the outlook for equity dividends looks bleak. The FT reports that total dividend payouts by European companies are expected to fall between 30% and 50% this year.

After the 2008 financial crisis, almost half of the companies that made up the iTraxx Europe Index either cut or suspended their equity dividend the following year. 

  Equity dividends-1
Data: Bloomberg and Tabula, excludes names who did not pay a dividend in 2008 and 2009.

It is also worth remembering that equity dividends scheduled for earlier this year were based on 2019 profits, so the impact of the last four months will likely linger into 2021 for equity income investors.

As companies suspend or cut their equity dividends in light of the Covid crisis, the coupon payments on their bonds remain a legal obligation. During June, semi-annual distributions representing 1.5% and 1.6% of NAV were announced for the EUR and GBP-hedged distributing share classes of the Tabula European Performance Credit UCITS ETF. The 12-month estimated gross yield for these share classes now stands at +4.5% and +5.1%.

While Covid-19 may have put the "END" in dividend it can't take the "FIXED" out of fixed income...



How did our ETFs perform in June?

  Tabula iTraxx IG Bond (EUR) Dist1 +1.5% See the factsheet >  
  Tabula European Performance Credit (EUR) Acc +2.2% See the factsheet >  
  Tabula European iTraxx Crossover Credit  (EUR) Acc +2.4% See the factsheet >  
  Tabula European iTraxx Crossover Credit Short (EUR) Acc -2.7% See the factsheet >  
  Tabula North American CDX High Yield Credit Short (USD) Acc2 +1.3% See the factsheet >  
Tabula J.P. Morgan Global Credit Volatility Premium (EUR) Acc
-1.9% See the factsheet >  
1 Performance represents the iBoxx iTraxx Europe Bond Index. 2 Performance represents the CDX North American High Yield Credit Short Index.
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