Covid dividends cuts push retail traders into leveraged ETFs in hunt for income


Just 85 FTSE 250 companies have either cut their most recent dividend, or plan to cut or reduce the next one

Just 85 FTSE 250 companies have either cut their most recent dividend, or plan to cut or reduce the next one

Dividend cuts seen across the FTSE 100 and FTSE 250 in response to the impact of the coronavirus pandemic has pushed greater numbers of retail investors into leveraged ETF strategies to replace the lost income.

Analysis by ETF provider GraniteShares found that 35 blue chips and 85 FTSE 250 companies have either cut their most recent dividend, or plan to cut or reduce the next one.

This decline in dividends has fuelled the growth in retail investors utilising leverage and short trading strategies via exchange traded products (ETPs), GraniteShares said.

Global dividends reach $1.3trn in 2020 despite Covid cuts

The company has seen the value of its 3x long and 3x short single stock ETPs increase by $352m in the first quarter of 2021 to $505m.

According to the data, 30 companies listed on the FTSE 100 index and 99 FTSE 250 firms have an annual dividend yield of less than 1%.

An additional 16 blue chip companies have an annual dividend yield of 0%, the data showed.

Will Rhind, founder and CEO at GraniteShares, said: “Dividends make up a huge part of returns for investors and many have been cut or cancelled as a result of the coronavirus crisis.

“As investors look to replace these lost returns, many sophisticated ones have turned to using leverage and short investment strategies.”

However, Janus Henderson has said it expects dividend payments for 2021 to reach $1.4trn as global dividends show signs of resurgence.

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Payouts in the first quarter of 2021 are just 1.7% lower on an underlying basis than the same period the previous year, the investment management company said.



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