One of the market impacts from this crisis is a cut to dividends from companies looking to save cash or from legislation limiting dividends and share buybacks until government money is paid back.
The S&P 500 has futures contracts based on the expected dividend paid from the S&P companies. The contract price is the dollar amount of dividend. So a dividend of $62 on an index value of 3,100 is a 2 per cent yield. The expectations for dividend growth three months ago was for that to rise to over $70 by the end of the decade. Last month, that expectation was for no dividend growth. Today, we see a negative hit to dividends and it will not return to $61 until the end of the decade.
Dividends should still be a part of portfolios, but investors should consider this changing dynamic in the markets for the next decade and have this conversation with their financial advisors.
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ISHARES MSCI FRONTIER 100 ETF (FM:UN)
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