Covid dividend cuts push retail traders to leverage

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

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

This decline in dividends has fueled the growth of retail investors using leverage and short trading strategies through exchange traded products (ETPs), GraniteShares said.

Global dividends reach $ 1.3 billion in 2020 despite Covid cuts

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

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

According to the data, 16 other blue chip companies have an annual dividend yield of 0%.

Will Rhind, Founder and CEO of GraniteShares, said: “Dividends are a huge part of returns for investors and many have been cut or canceled as a result of the coronavirus crisis.

“As investors seek to replace these lost returns, many sophisticated investors have turned to the use of leverage and short investing strategies.”

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

Payments in the first quarter of 2021 are only 1.7% lower on an underlying basis compared to the same period a year earlier, the investment management company said.

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